Singapore Post Ltd (SPOST SP) - Maybank Kim Eng 2017-10-11: SingPost Centre To Deliver Technology-enabled Experience

Singapore Post Ltd (SPOST SP) - Maybank Kim Eng 2017-10-11: SingPost Centre To Deliver Technology-enabled Experience SINGAPORE POST LIMITED S08.SI

Singapore Post Ltd (SPOST SP) - SingPost Centre To Deliver Technology-enabled Experience


Healthy occupancy rate on opening 

  • SingPost opened its new retail mall, SingPost Centre on 9 Oct 2017, after 2 years of redevelopment. This has doubled its gross retail floor space to 269k sf and net lettable area to 178k sf. 
  • It has achieved a healthy occupancy rate of 80.4%, helped by its convenient location, next to Paya Lebar MRT interchange station. The mall also highlights SingPost’s embracement of how technology is changing the retail landscape. 
  • We expect an additional rental income of SGD22m, which translates to c.SGD13m earnings at steady state of 90% occupancy. For FY18E, SingPost Centre should contribute SGD3m of earnings (3% of total) and SGD13m of earnings (10% of total) for FY19E. 
  • Maintain HOLD and DCF-based Target Price of SGD1.22, pending clearer direction from the strategic review of its business strategy. 
  • Risks: weaker traditional mail and e-commerce drag.


Convenient location that is rapidly transforming 

  • As mentioned, the mall is located next to the Paya Lebar MRT interchange station, which is on the East-West and Circle lines. It is set to invigorate Paya Lebar Central, which is rapidly transforming into a major commercial hub under the Urban Redevelopment Authority’s master plan. 
  • The mall houses up to 130 stores, including leading brands in fashion, dining, entertainment, fitness and children’s enrichment. 
  • SingPost Centre is managed by CapitaLand under a contract.


Technology-enabled experience 

  • Technology-enabled innovations were implemented:
    1. it introduced the first all-laser Cineplex by Golden Village, where award-winning Smart Laser projectors have been installed for superior image quality;
    2. At NTUC FairPrice, there are several innovations to reduce the time needed for grocery runs. The store features scan-and-go systems where customers can collect scanners and scan items as they shop before paying. A new mobile app helps shoppers identify the shortest route to the product;
    3. A new General Post Office offers automated services that improve operational efficiency and provides 24/7 access to postal and other essential services;
    4. Diners can earn rewards via the Kopitiam loyalty programme when they order healthier choice meals or return their trays at the designated counters.


Swing Factors


Upside

  • Faster-than-expected turnaround of TradeGlobal, a newly acquired e-commerce enabler for fashion and lifestyle.
  • Higher-than-expected revenue growth in e-commerce logistics, from more customers and services.
  • Higher-than-expected margins for e-commerce logistics, from economies of scale and operating leverage.

Downside

  • Inability to resolve corporate-governance conundrum, including independence of the board and inadequate disclosure.
  • Failure to extract synergies and integrate its largest acquisition, TradeGlobal.
  • Worse-than-expected deterioration in mail business before e-commerce logistics compensates.




John Cheong CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-10-11
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.220 Same 1.220



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