SingPost – BT Malaysia
SingPost rules out Pos stake
SingPost also says it has no plans to acquire more GD Express Carrier shares at the moment
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Singapore Post Ltd (SingPost) is not bidding for Khazanah Nasional Bhd’s 32.2 per cent stake in Pos Malaysia Bhd (4634) and will also not buy any more shares in courier company GD Express Carrier Bhd (GDEX).
The postal company, valued at S$2.2 billion (RM5.36 billion), on March 15 boosted its stake in GDEX to 27 per cent from 5 per cent as it seeks to expand in the region.
“It enables us to enhance our network and provides us with a platform to tap the growing logistics market in the region. SingPost also has no plans to acquire more GDEX shares at the moment,” it said in an e-mail response to a Business Times enquiry.
The deal raised eyebrows as it was done a day before Khazanah’s tender deadline for Pos Malaysia.
SingPost, which bought the extra GDEX shares for RM45.5 million, said it is also not eyeing other carrier players in Malaysia for now.
GDEX executive director and chief executive officer Leong Chee Tong said with the purchase, both companies can now pool resources to tap the region’s mail and bulk logistics industry.
“In future, we can explore the postal sector in the region such as in Indochina. But we have to be very patient in understanding the market and then build network because it is a well-protected sector,” Leong told Business Times in a phone interview.
He added that SingPost and GDEX are “cross bordering” currently in the logistics sides, of which SingPost is already using GDEX in making deliveries in different parts of Malaysia and vice-versa.
In a separate statement, SingPost said GDEX will continue to operate independently and there are no immediate plans to change any of the current working arrangements.
SingPost will continue to channel volume through a partner that provides good services at competitive rates.
Leong said although the industry is intensely competitive with some 100 local players, the firm is optimistic of a healthy growth in the future as it registered robust growth in the last six months.
“But, we are cautious with the latest developments in Japan. However, we expect the RM2 billion a year industry to sustain its momentum,” said Leong.
The country’s top courier companies are foreign owned with DHL, FedEx, UPS and TNT commanding a 60 per cent market share. Some 95 per cent of their business is in the delivery of mail and packages abroad.
GDEX has a market share of 4.5 per cent of Malaysia’s carrier service which includes players like Nationwide Express, SkyNet, ABX, Citylink RCS and others.
However, compared to the foreign firms, 95 per cent of the local carriers’ business are in Malaysia.
SingPost is 26.01 per cent owned by Singapore’s state-owned investment arm, Temasek Holdings Pte Ltd. SingPost operates in Australia, Hong Kong, India, Japan, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand.
Meanwhile, GDEX shares closed at 81 sen yesterday after hitting an intra-day of 93 sen a share, their highest in 52 weeks. SingPost closed unchanged at S$1.1 (RM2.63) a share.
SingPost – OCBC
Seeks to expand network in Malaysia
Acquires more interest in express carrier service provider. Singapore Post (SingPost) yesterday announced that it had acquired 56.8m shares of GD Express Carrier Berhad (GDEX), a company listed on the ACE Market of Bursa Malaysia Securities Berhad, through block trades. The total consideration was about RM45.47m (~S$18.9m), or RM0.80/share, and is payable in cash. SingPost’s shareholding in GDEX will increase from 4.98% to 27.08% and GDEX will become an associated company. The weighted average price of GDEX shares on 14 Mar 2011 was RM0.82/share, which is similar to the consideration paid by SingPost, though we note that GDEX’s stock price has risen more than 40% YTD. Its NTA/share is RM0.16, based on audited financial statements for FY10.
GDEX’s network spans East and West Malaysia. GDEX is an express carrier service provider in Malaysia which offers express delivery and customized logistics services. According to its website, GDEX operates a network of 96 stations, comprising 53 branches, two affiliate stations and 41 agents throughout East and West Malaysia. The group’s net profit margin has ranged between 2.6% and 7.3% from FY06-FY10, while ROE has generally been on the uptrend from 3.7% in FY06 to about 14.0% in FY10.
Rationale for acquisition. SingPost currently has a presence in Malaysia through Quantium Solutions, its wholly-owned subsidiary which specializes in cross-border mail and logistics within the region. Its acquisition of GDEX shares should allow it to leverage on GDEX’s resources and network to grow its presence in Malaysia. It is worth noting that SingPost has been collaborating with GDEX in the logistics business and a good working relationship exists between both parties, hence increasing the chances of a successful collaboration.
Maintain HOLD. As part of its diversification and regionalization strategy, SingPost has been actively looking at M&As and investment opportunities, and we expect more of such news to come. However, pending more news and concrete details of its expansion strategy, we maintain our HOLD rating and fair value estimate of S$1.16 on SingPost for now. Meanwhile, amidst weak investor sentiment from the developments in Japan, from a tactical asset allocation point of view, investors may consider rotating into stocks such as SingPost considering its 1) stable operating cash flows with little exposure from Japan, 2) relatively lower beta, and 3) attractive dividend yield of 5.4%.
ComfortDelgro – DBSV
Opportunity within turmOIL
• Market overpricing risk of high oil price in SIA and CD
• Raised oil price assumptions to stay on the conservative side
• Demand and trade are key for airlines and container liners, while oil accounts for a relatively small proportion of land transport operators’ costs
• Our picks are SIA for rebound and CD for value
Opportunity within turmoil. We believe market has more than factored in the current high prices due to the current Mid-East turmoil. Opportunity to buy SIA, which seems oversold, and CD, which offers value.
Raising oil price assumptions. No one is certain how long the current Mid-East turmoil will last, or if it will spread. To stay on the conservative side of our earnings forecasts, we have raised our oil/jet fuel/ bunker price assumptions up by 10-20%, which has resulted in a downward revision in earnings of 4%-10%. At current oil price, we believe margins would no doubt be squeezed, but these companies should still remain profitable. We summarise our views for the respective subsectors:
• Air: At US$125/130 per barrel, this level of jet fuel price is high but manageable for the airlines. We believe demand is still the key for airlines and see SIA to be better poised to pass on costs.
• Land: Fuel accounts for c.9-15% operators’ topline and a US$10/bbl change in oil price could impact bottomline by c.7-9%. We believe CD will be more resilient vis-à-vis SMRT in this current environment given it has hedged 20% of 2011 requirements.
• Sea: Trade growth is the key factor driving NOL’s profitability. We believe rising bunker costs will not impact NOL’s earnings too significantly, as long as there is no demand destruction.
Buy SIA for rebound potential; CD for value. At current share prices, our analysis (based on our forecasting model) suggests that the market is factoring in jet fuel price of US$150 for SIA and oil price of US$130 for CD, which is way above current levels (Jet fuel: US$130; WTI: US$105). Given our view that SIA was sold down mainly on concerns of high oil prices, we believe SIA should offer the strongest rebound potential, if oil price retreats. Our picks are SIA (Buy, TP: S$17.30) and CD (Buy, TP: S$1.86). We maintain our Hold recommendations for NOL (TP S$2.15), MRT (TP lowered to S$2.03) and TGR (TP lowered to S$1.60).
ComfortDelgro – DBSV
Opportunity within turmOIL
• Market overpricing risk of high oil price in SIA and CD
• Raised oil price assumptions to stay on the conservative side
• Demand and trade are key for airlines and container liners, while oil accounts for a relatively small proportion of land transport operators’ costs
• Our picks are SIA for rebound and CD for value
Opportunity within turmoil. We believe market has more than factored in the current high prices due to the current Mid-East turmoil. Opportunity to buy SIA, which seems oversold, and CD, which offers value.
Raising oil price assumptions. No one is certain how long the current Mid-East turmoil will last, or if it will spread. To stay on the conservative side of our earnings forecasts, we have raised our oil/jet fuel/ bunker price assumptions up by 10-20%, which has resulted in a downward revision in earnings of 4%-10%. At current oil price, we believe margins would no doubt be squeezed, but these companies should still remain profitable. We summarise our views for the respective subsectors:
• Air: At US$125/130 per barrel, this level of jet fuel price is high but manageable for the airlines. We believe demand is still the key for airlines and see SIA to be better poised to pass on costs.
• Land: Fuel accounts for c.9-15% operators’ topline and a US$10/bbl change in oil price could impact bottomline by c.7-9%. We believe CD will be more resilient vis-à-vis SMRT in this current environment given it has hedged 20% of 2011 requirements.
• Sea: Trade growth is the key factor driving NOL’s profitability. We believe rising bunker costs will not impact NOL’s earnings too significantly, as long as there is no demand destruction.
Buy SIA for rebound potential; CD for value. At current share prices, our analysis (based on our forecasting model) suggests that the market is factoring in jet fuel price of US$150 for SIA and oil price of US$130 for CD, which is way above current levels (Jet fuel: US$130; WTI: US$105). Given our view that SIA was sold down mainly on concerns of high oil prices, we believe SIA should offer the strongest rebound potential, if oil price retreats. Our picks are SIA (Buy, TP: S$17.30) and CD (Buy, TP: S$1.86). We maintain our Hold recommendations for NOL (TP S$2.15), MRT (TP lowered to S$2.03) and TGR (TP lowered to S$1.60).
SMRT – BT
GLP to replace SMRT as STI constituent
GLOBAL Logistic Properties (GLP) will replace transport group SMRT Corp as a constituent of the Straits Times Index (STI) on March 21. This follows a half-yearly review of the Singapore market index.
Singapore Press Holdings (SPH), Singapore Exchange (SGX) and FTSE Group, which jointly announced the constituent changes in the STI and FTSE ST Indices, said SMRT Corp will join the FTSE ST Mid-Cap Index.
The STI, a widely followed benchmark, comprises the top 30 SGX mainboard-listed companies by market capitalisation and which pass the relevant investability screens.
GLP, which was listed in October last year, is one of the largest providers of modern logistics facilities in the region. The group owns, manages and leases out a vast network of properties.
The STI reserve list, comprising the top five non-constituents of the index in terms of market capitalisation, are Yangzijiang Shipbuilding Holdings, Keppel Land, Cosco Corp Singapore, CapitaCommercial Trust and Ascendas Real Estate Investment Trust.
Companies in the reserve list will replace any constituent that becomes ineligible as a result of corporate actions before the next review, which is scheduled for Sept 8.
Other constituent changes were also announced yesterday for FTSE ST Indices, such as the FTSE ST Maritime and FTSE ST Catalist. For the FTSE ST China Top Index, Keppel Land, Guocoland, Hi-P International and China Minzhong Food Corp will replace Raffles Education Group, Oceanus Group, China XLX Fertiliser and China Hongxing Sports.
Details of all deletions and additions can be found under the Index Reviews section at www.ftse.com/st.