Singapore Post - OCBC Investment 2017-11-16: Highlights Broad Themes Of Strategic Review

Singapore Post - OCBC Investment 2017-11-16: Highlights Broad Themes Of Strategic Review SINGAPORE POST LIMITED S08.SI

Singapore Post - Highlights Broad Themes Of Strategic Review

  • Low margins in logistics.
  • Postal still main contributor.
  • Outlines key strategy.

2QFY18 results in line 

  • Singapore Post (SingPost) registered a 10.2% YoY rise in revenue to S$354.7m but saw a 9.5% fall in net profit to S$28.5m in 2QFY18, such that 1HFY18 net profit accounted for 49% of our full year estimates, in line with expectations. 
  • Underlying net profit rose 1.9% YoY to S$27.6m in the quarter, and was up 2.4% QoQ. 
  • In terms of operating profit, postal was still the main contributor at S$35.1m in 2QFY18, followed by S$1.1m from property & others. Logistics saw a S$4.2m operating loss while eCommerce had a S$2.9m loss as well.

Tough environment in logistics 

  • Logistics was impacted by a one-off provision for doubtful debts in 2QFY18; excluding that, operating profit for this segment would have been about S$1.0m. This is still low compared to historical standards, and we understand that Quantium Solutions Hong Kong was impacted by intense pricing competition resulting in the loss of business.

Update on strategic review 

  • The group has mentioned a few broad themes for its strategic review, though it seems that most of it has been articulated earlier. This includes
    1. winning in the home market,
    2. delivering full value from overseas investments,
    3. igniting future growth engines and
    4. driving cost leadership. 
  • With regards to the first theme, SingPost will strive to be the leading eCommerce logistics player in Singapore, building on its strong infrastructure backbone. It will also seek to harness innovative solutions to serve the urban logistics needs of a smart nation. For the second theme, SingPost will continue on its turnaround strategy for TradeGlobal, integrate across geographies and maximize potential of overseas investments. For the third theme, SingPost seeks to capture global cross-border eComm flows by strengthening the strategic collaboration with Alibaba and associates. SingPost will also build out its eComm logistics capabilities in SE Asia. 
  • Looking ahead, we are positive on the group’s strategy but time will be needed to bear fruit. 
  • We roll forward our valuations and our fair value estimate rises from S$1.22 to S$1.26. Maintain HOLD.

Low Pei Han OCBC Investment | 2017-11-16
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.26 Up 1.220