Singapore Post - OCBC Investment 2017-03-07: Lacks catalysts

SINGAPORE POST LIMITED S08.SI

Singapore Post - Lacks catalysts

Singapore Post (SingPost) announced yesterday that Mr. Marcelo Wesseler has resigned as CEO of SP eCommerce, and will be assisting the company to ensure a transition of duties during his period of notice till 5 Jun 2017.
Mr. Paul Demirdjian has been appointed Interim CEO, US Businesses; he is currently the President and CEO of SingPost’s US subsidiary, Jagged Peak.

Meanwhile, SingPost also announced last Friday that Quantium Solutions International Pte Ltd has entered into a share purchase agreement with PT Rantai Bumi Laut (RBL) to acquire 1,800 ordinary shares, representing 18% of the issued share capital of PT Quantium Solutions Logistics Indonesia (QSLI) for a cash consideration of US$54k (~S$76k). The net liabilities of QSLI as at 31 Jan 2017 was Rp 13.4b (~ S$1.41m). Upon completion, QSI’s interest in QSLI will be 67%.
QSI is a JV between SingPost (66% stake) and Alibaba Investment Limited (34% stake) whereas QSLI is in the business of ecommerce logistics fulfillment in Indonesia.
Recall that QSI set up QSLI with RBL in Jan 2014 with an initial paid-up capital of about S$375k, of which 49% was subscribed by QSI. According to a study by Google and Temasek last year, 18m people in Indonesia fell into the category of online buyers, representing about 7% of the population. By 2025, it is expected that Indonesia will dominate 52% of all ecommerce activity in SE Asia, due to its 1) huge population and 2) island geography.

SingPost is investing for the future, and time is required for the efforts to bear fruit. After correcting post its 3QFY17 results, the stock has been trading within a range of S$1.37 and S$1.40, likely due to lack of catalysts.
Meanwhile, the market will likely look forward to 1 Jun 2017, which is when the new CEO joins the group. We fine-tune our estimates and our fair value estimate drops slightly from S$1.42 to S$1.39.
Maintain HOLD.

Low Pei Han OCBC Investment | http://www.ocbcresearch.com/ 2017-03-07

OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.39 Down 1.420