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

Singapore Post - OCBC Investment 2017-03-07: Lacks catalysts SINGAPORE POST LIMITED S08.SI

Singapore Post - Lacks catalysts

  • SP eCommerce CEO resigns.
  • Investing more in Indonesia.
  • Waiting for 1 Jun.

CEO of SP eCommerce resigns 

  • 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.

Ups stake in Indonesian entity 

  • 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.

Maintain HOLD; lacks catalysts 

  • 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 | 2017-03-07
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.39 Down 1.420