SingPost – Kim Eng
Wait For A Better Entry Point
Decent results as expected. Singapore Post announced its 2QFY3/13 results yesterday morning. The results were in line with consensus and our estimates. 1HFY3/13 revenue increased by 7.8% yoy to SGD305m, representing 50.6% of our full-year forecast and net profit excluding one-off items was slightly down by 0.6% to SGD69m. We maintain our HOLD rating and target price of SGD1.10 unchanged as we think the upside is very limited after recent strong share price performance.
Transformation only improves the top line. We appreciate Singapore Post’s transformation effort as we saw positive revenue growth momentum in recent quarters. In the first half of FY3/13, SingPost recognized revenue growth in all business segments (Mail sector up 8.0% yoy; Logistics sector up 7.8% yoy and Retail sector up 8.7% yoy) despite the continuous decline in letter volumes. The growth was mainly driven by consolidation of new acquired subsidiary Novation Solutions as well as the revenue growth in Quantium Solutions and Speedpost.
Still too early to see significant bottom line improvement. Despite respectable top line growth, net profit failed to make any growth (down by 0.6% yoy) in 1HFY3/13 compared with a year ago. In our view, we are not likely to see significant bottom line growth in short to medium term because of inflationary cost pressure and gradual shift to lower margin Logistics business.
Property assets divestment? SingPost’s post offices island-wide are precious assets to shareholders. Although the management is open to listening to any offer, we don’t think it will sell their property assets given SingPost’s big net cash position unless the price is too good to say no. However we will appreciate such divestment practice to unlock the hidden value to shareholders.
Wait for a better entry point. SingPost is more of a yield play. However its current dividends yield of 5.4% is no longer attractive relative to its historical average of 6.0%. We recommend that investors take profit and wait for a better entry point.
SIAEC – OCBC
1HFY13 RESULTS IN LINE
- 1HFY13 EPS is 49% of our FY13 estimate
- S$3.1m write-back of tax provision
- Stable outlook in near term
1HFY13 financials in line with expectations
SIA Engineering Co Ltd’s (SIAEC) 1HFY13 financial results were generally in line with our expectations. Basic EPS for 1HFY13 was 12.47 S cents, 49% of our FY13F estimate of 25.6 S cents. Revenue climbed by 6.4% YoY to S$585m, attributable mainly to revenue from materials, fleet management program and line maintenance. Operating margin declined 1.4ppt from 1HFY12 to 11.1% in 1HFY13 because of higher material cost, exchange loss, and increase in subcontract and staff costs. 1HFY13 recorded an exchange loss of S$3.7m versus an exchange gain of S$8.6m a year ago.
Increase in contribution from associates and JVs
Share of profits from associated and joint venture companies increased 1.4% YoY to S$78.8m, accounting for 51% of SIAEC’s pretax profits. 1HFY13 PATMI declined 1.5% YoY to S$137.2m chiefly because profit for the period a year ago included a S$3.1m write-back of tax provision. To achieve a better balance between the interim and final dividends, SIAEC has declared an interim dividend of 7 S cents, an increase of 1 S cents per share over last year.
Sustained demand in near term
Management expects that that demand for the company’s core businesses will be sustained in the near term. SIAEC acknowledges that the operating environment poses challenges as the global economy continues to affect the aviation industry. Management will continue to be vigilant about cost control and productivity improvements.
Maintain HOLD
Rolling our valuation forward, we use 3QFY13-2QFY14 basic EPS of 26.2 S cents and a P/E multiple of 15.8x (half a standard deviation higher than the 4-year average of 14.6x). We increase our fair value estimate from S$4.04 to S$4.14 and maintain our HOLD rating on SIAEC.
October 2012
Results Announcement
- 12 Oct 12 : SPH (Q412) – EPS 6ct (todate 23ct) ; Div = 17ct (todate 24ct)
- 15 Oct 12 : M1 (Q312) – EPS 3.6ct (todate 11.9ct)
- 30 Oct 12 (AM) : SingPost (Q213) – EPS 1.54ct (todate 3.361ct) ; Div = 1.25ct (todate 2.5ct)
- 30 Oct 12 : SIAEC (Q213) – EPS 6.09ct (todate 12.47ct) ; Div = 7ct
- 31 Oct 12 : SMRT (Q213) – EPS 2.2ct (todate 4.6ct) ; Div = 1.5ct
- 2 Nov 12 : StarHub (Q312)
- 6 Nov 12 : SATS (Q213)
- 12 Nov 12 : ComfortDelgro (Q312)
- 14 Nov 12 (AM) : Singtel (Q213)
STI = 3038.37 (-0.36)
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
HL Fin |
FY11 (Dec) |
22.65 |
12.00 |
$2.500 |
4.800% |
11.04 |
Interim 4ct ; Final 8ct |
|
SingPost |
FY12 (Mar) |
7.407 |
6.25 |
$1.140 |
5.482% |
15.39 |
Q1, Q2, Q3 1.25ct ; Q4 2.5ct |
|
SPH |
FY12 (Aug) |
23 |
24.0 |
$4.040 |
5.941% |
17.57 |
Interim 7ct ; Final 9ct + Special 8ct |
Aviation Services
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SATS |
FY12 (Mar) |
15.40 |
26.0 |
$2.790 |
9.319% |
18.12 |
Interim 5ct ; Final 6ct + Special 15ct |
|
SIA Engg |
FY12 (Mar) |
24.56 |
21.0 |
$4.200 |
5.000% |
17.10 |
Interim 6ct ; Final 15ct |
|
ST Engg |
FY11 (Dec) |
17.28 |
15.5 |
$3.520 |
4.403% |
20.37 |
Interim 3ct ; Final 4ct + Special 8.5ct |
Note : SATS Special Div is Observed to be Non-Recurring
Transport
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SBSTransit |
FY11 (Dec) |
11.89 |
5.90 |
$1.465 |
4.027% |
12.32 |
Interim 3.1ct ; Final 2.8ct |
|
ComfortDelGro |
FY11 (Dec) |
11.27 |
6.00 |
$1.690 |
3.550% |
15.00 |
Interim 2.7ct ; Final 3.3ct |
|
SMRT |
FY12 (Mar) |
7.9 |
7.45 |
$1.735 |
4.294% |
21.96 |
Interim 1.75ct ; Final 5.7ct |
TELCO
|
Stock |
Period |
EPS cts |
DPS cts |
Mkt |
Yield |
PE |
Div Breakdown |
|
SingTel |
FY12 (Mar) |
25.04 |
15.8 |
$3.220 |
4.907% |
12.86 |
Interim 6.8ct ; Final 9ct |
|
M1 |
FY11 (Dec) |
18.1 |
14.5 |
$2.610 |
5.556% |
14.42 |
Interim 6.6ct ; Final 7.9ct |
|
StarHub |
FY11 (Dec) |
18.40 |
20 |
$3.680 |
5.435% |
20.00 |
Q1 5ct ; Q2 5ct ; Q3 5ct ; Q4 5ct |
Funds / Infrastructure
|
Stock |
Period |
DPS cts |
Mkt |
Yield |
NAV |
Div Breakdown |
|
SPAus |
2H – Mar12 |
A4.0 (Gross) |
$1.350 |
7.511% |
A$0.88 |
2H12 A4.0ct ; 1H12 A4.0ct |
|
MIIF |
1H – Jun12 |
2.75 |
$0.560 |
9.821% |
$0.720 |
1H11 2.75ct ; 2H11 2.75ct |
* SPAus DPU in A$. Yield is Calculated Using Latest Exchange Rate (1.2675) fm Yahoo
NOTES :
- Mkt Price is as on 31-Oct-12
- SMRT : Q213 (Sep12) – Interim 1.5ct
- SIAEC : Q213 (Sep12) – Interim 7ct
- SingPost : Q213 (Sep12) – 1.25ct ; Q113 (Jun12) – 1.25ct
- SPH : 2H12 (Aug) – Final =9ct + Special = 8ct ; 1H12 (Feb) – Interim = 7ct
- ST Engg : 1H12 (Jun) – 3ct
- ComfortDelgro : Q212 (Jun) – 2.9ct
- SBSTransit : Q212 (Jun) – 1.35ct
- StarHub : Q212 (Jun) – 5ct ; Q112 (Mar) – 5ct
- MIIF : 1H12 (Jun) – 2.75ct ; 2H11 (Dec) – 2.75ct ; Guidance for 2H12 (Dec) = 2.75ct but FY13 will be Impacted by HNE (Revenue Reduced by 20% – 25% due to Max Toll Cap)
- SPAus : 2H12 (Mar12) – A4ct = A1.333ct (Franked) + A2.159ct (Interest) + A0.508ct (Capital Returns) ; FY12 Guidance = A8.2ct ; 3-for-20 @ S$1.25 (A$1)
- SATSvcs : Q412 (Mar12) – Final 6ct + Special 15ct ; Q212 (Sep11) – Interim 5ct
- SingTel : 2H12 (Mar12) – Final 9ct ; 1H12 (Sep11) – Interim 6.8ct ; Includes Exceptional Net Tax Credit S$270M
- StarHub : FY12 Div Guidance – 5ct/Q
- M1 : 2H11 (Dec) – Final 7.9ct ; 1H11 (Jun) – Interim 6.6ct
SingPost – OCBC
STILL A STALWART AMIDST GLOBAL UNCERTAINTY
- Steady results
- Softening margins expected
- Bulwark amidst global uncertainty
No surprises from results
Singapore Post (SingPost) reported a set of in-line results with revenue rising 9.1% YoY to S$153.7m and net profit increasing 7.3% to S$32.9m in 2QFY13, such that 1HFY13 net profit accounted for 49.3% and 52.5% of ours and the street’s full year estimates,
respectively. Revenue grew in all three business segments of mail, logistics and retail. Rental and property-related income, however, declined by 7.0%.
Margins likely to continue to weigh
As expected, margins are slightly lower; operating margin decreased from 28.5% in 2QFY12 to 28.1% in 2QFY13 while profit margin before tax slipped from 27.3% to 26.5%. Looking ahead, we expect margins to be weighed down by cost pressures and higher revenue contribution from the lower-margin logistics business. However, the group also recognises this and has been managing inflationary cost pressures with cost management and optimisation measures. For instance, it is seeking to increase productivity by investing in new sorting machines and new technology. Non-strategic costs are also cut by outsourcing certain operations such as customer service hotlines to India and the Philippines.
Stock to hold amidst uncertain environment
We like SingPost for its stable operating cash flows and consistent dividends. At the same time, the group has launched new initiatives over the years and diversified into other business areas as well. However, the next leg of growth is heavily dependent on
management’s astute use of the group’s cash (net cash position of S$125.1m in 2FY13), including M&A opportunities. In line with its usual practice, the group has declared an interim dividend of 1.25 S cents per share for the quarter. At current price levels, we expect a dividend yield of 5.4% in FY13F. Rolling forward our valuations, our fair value estimate rises slightly to S$1.23 from S$1.20 previously. Maintain BUY.
MIIF – AmFraser
Are Investors Pricing In Too Much Uncertainty?
Offering a distribution yield of 9.91%, Macquarie International Infrastructure Fund (MIIF) distinctively stands out among high-yield alternatives. However, despite boasting an attractive yield amid the historically low-rate environment, MIIF continues to trade at a sizeable discount of 25% to its book value. In today’s quick take, we seek to explore potential investor concerns underpinning the considerable degree of undervaluation of the stock.
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Perhaps investors need more conviction about the sustainability of MIIF’s distribution yield. MIIF reported a distribution yield of around 8.5% in FY2011 and paid out a 5.5c dividend in FY2012. While MIIF has guided for another 2.75c interim dividend for H212, which is to be paid in early 2013, investors may be concerned about the sustainability of its distribution payout, given the recent 20% toll reduction on Hua Nan Expressway (HNE) Phase 1 and growing debt amortization at HNE.
Toll rates on HNE Phase 1 were reduced from CNY0.75/km to CNY0.60/km on June 1 2012 and the full impact of the toll reduction has yet to be borne out in MIIF’s recent interim results.
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Are investors worried about refinancing issues at MIIF? Taking a relative look at Rickmers Maritime, the company offers a dividend yield of 7.9% but is trading at a discount of 68% to its book value. Although Rickmers has adopted a focus on the deleveraging of its balance sheet and successfully reduced its debt/capital ratio from 66% in 2009 to 61% at the end of Q212, the fact that it continues to trade at a massive discount to its NAV probably suggests that more needs to be done to restore investor confidence in the wake of its financial troubles in 2009-2010.
While MIIF certainly cannot be viewed in the same light as Rickmers, there may be a certain degree of investor apprehension about its ability to refinance its loans going forward. MIIF has a NT2.3bn loan due in 2013 and a NT15.5bn loan maturing in 2017 for Taiwan Broadband Communications. Meanwhile, Changshu Xinghua Port has a maturing debt of RMB180mn in July 2014 and debt of RMB175mn to be repaid over 2015 to 2017.
- Attractiveness as a yield play may have been dampened by half-yearly distributions. MIIF’s appeal as a high-yielding play in the current climate may have been dampened by the semi-annual frequency of its distributions. Presently, 8 out of 10 REITs and business trusts that distribute on a semi-annual basis are trading at a discount to their book value while 6 out of 18 REITs and business trusts distributing on a quarterly basis trades at a discount to their book value.
The key question, clearly, is whether a 25% discount to book value is overpricing in the aforementioned concerns. We believe so and have a target price of S$0.670 on MIIF. Moreover, as stated in our earlier report, we believe a strategic review currently undertaken by MIIF is likely to act as a positive catalyst and potentially trigger a re-rating of the stock.