Singapore Post - OCBC Investment 2016-05-11: Good top-line growth

Singapore Post - OCBC Investment 2016-05-11: Good top-line growth SINGAPORE POST LIMITED S08.SI 

Singapore Post: Good top-line growth 

  • Results in line 
  • Underlying net profit lower 
  • Alibaba long-stop date extended 

Results in line 

  • Singapore Post (SingPost) reported a 27.7% YoY rise in revenue to S$317.6m and a 196.4% increase in net profit to S$105.4m in 4QFY16, boosted by one-off gains from the partial disposal of an associated company (GD Express Carrier Bhd) and sale of available-for-sale investments totaling S$78.8m. 
  • Underlying net profit, however, dropped 20.1% to S$31.8m in 4QFY16. 
  • As FY16 underlying net profit of S$153.6m was just 4% higher than our full year estimate, we judge this set of results as within expectations. 
  • Excluding the impact of loss of income from the SPC mall redevelopment and deconsolidation of DataPost and Novation Solutions, underlying net profit would have been stable. 

Good topline figures; core operating profit fell 1.1% 

  • In FY16, annual revenue totaled S$1.15b (+25.2%), surpassing the S$1b mark for the first time. This was driven by eCommerce related growth and acquisitions. 
  • Indeed, logistics revenue rose 34.7% to S$626.0m, while retail & eCommerce revenue increased 74.6% to S$160.7m, largely due to the US acquisitions (TradeGlobal and Jagged Peak). 
  • Mail revenue was flat at S$500.0m. 
  • In terms of operating profit, however, performance was more subdued. 
  • Excluding one-off items, operating profit fell 1.1% to S$188.9m in FY16, mainly due to loss of rental revenues from SPC as well as increased corporate overheads. 
  • Retail & eCommerce operating profit also fell from S$9.7m in FY15 to S$2.5m in FY16. 

Updates on the board and Alibaba 

  • Meanwhile, the group’s corporate governance issues have resulted in the departure of two board members, and whilst Mr. Simon Israel (SingTel’s Chairman) will be SingPost’s new Chairman, a replacement has yet to be found for the CEO position. 
  • As for Alibaba’s second tranche of investment, the long-stop date has been extended to 31 Oct 2016. 

Continues to deliver your dividend 

  • In line with the group’s usual practice, SingPost has declared a final dividend of S$0.025/share, bringing full year dividends to S$0.07/share (4.4% dividend yield). 
  • Along with a calm that has descended upon the market (albeit a low- volume one), we use a lower cost of equity of 6.5% (terminal growth rate remains at 2%), and our fair value estimate rises from S$1.37 to S$1.56
  • Maintain HOLD.

Carmen Lee OCBC Securities | 2016-05-11
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 1.56 Up 1.37