Singapore Post - OCBC Investment 2015-11-03: Continues to deliver amidst transformation

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SINGAPORE POST LIMITED S08.SI 

Singapore Post: Continues to deliver amidst transformation 

 Driven by logistics 

 More overseas, eCommerce revenue 

 Still delivering dividends 

2QFY16 results within expectations 

• Singapore Post (SingPost) reported a 19.4% YoY rise in revenue to S$263.2m and a 38.5% increase in net profit to S$53.4m in 2QFY16, such that 1HFY16 revenue and net profit accounted for 50% and 54% of our full year estimates, respectively. 
• Excluding the impact of acquisitions and divestment of subsidiaries, revenue remained stable. 
• Stripping out one-off items, underlying net profit fell 4.8% YoY to S$37.5m in the quarter as the group continued to invest in eCommerce infrastructure and capabilities to accelerate customer acquisitions in the global eCommerce market. 

Driven by logistics revenue 

• Mail revenue in the quarter dropped 5.6% YoY to S$116.5m, negatively impacted by the divestment of DataPost in 2QFY16 but offset by the postage revision in Oct 2014. 
• Unsurprisingly, “Logistics” was the star performer with a 43.3% YoY rise in revenue to S$156.1m in 2QFY16 due to growing contributions from eCommerce logistics activities and the inclusion of new subsidiaries. 
• Finally, in the “Retail and eCommerce” segment, revenue increased 7.1% YoY to S$23.9m. 

Higher dependence on overseas and eCommerce 

• As SingPost continues to invest in its transformation initiatives, overseas revenue now accounts for a higher percentage of total revenue (39.5% in 1HFY16 vs 30.0% in 1HFY15). 
• E-commerce related turnover has also increased from 26.9% (S$116m) in 1HFY15 to 29.0% (S$150m) in 1HFY16. 
• Looking ahead, the group sees accelerated growth in the years ahead due to present and past initiatives. 

Consistent dividends amidst transformation 

• Meanwhile, with regards to Alibaba’s second tranche of investment in SingPost (announced 8 Jul 2015 for a 5% stake), the long-stop date has been extended from 30 Nov 2015 to 29 Feb 2016, as both parties are in the process of fulfilling certain conditions in the agreement. 
• Finally, in line with its usual practice, the group has declared an interim quarterly dividend of 1.5 S cents, higher than 1.25 S cents in the same period last year. 
• Maintain BUY with S$2.19 fair value estimate.

Carmen Lee OCBC Securities | http://www.ocbcresearch.com/ 2015-11-03

OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 2.19 Same 2.19