Singapore Post - OCBC Investment 2018-05-11: Signed, Sealed, Delivered

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SINGAPORE POST LIMITED SGX: S08

Singapore Post - Signed, Sealed, Delivered

• Singapore Post registered S$126m net profit in FY18 vs. S$33m in FY17. 
• Higher utilisation levels. 
• On the mend. 

Healthy FY18 results

• Singapore Post (SingPost) registered a 13.5% y-o-y rise in revenue to S$367.5m and a net profit of S$23.9m in 4QFY18, compared to net loss of S$65.2m in 4QFY17. This brought full year net profit in FY18 to S$126.4m, higher than ours (S$117m) and the street’s expectations (S$112m). In comparison, FY17 net profit was S$33.4m. 
• Underlying net profit fell 9.2% to S$105m in FY18, largely due to lower operating profit in the logistics segment. 
• Free cash flow improved to S$136m due to lower capital expenditure, while the group saw an improved net cash position of S$70m.

Improving utilisation levels

• The market has been monitoring utilization levels of SingPost’s regional eCommerce logistics hub. For the warehousing section, utilization has increased to 96% as at 31 Mar 2018, while the parcel sorting side had average daily utilization of 21% for 4QFY18 vs. 14% in 4QFY17, based on handling capacity of 100k parcels a day. 
• As for SingPost Centre retail mall, committed occupancy is improved from 85.9% as at 31 Dec 2017 to 95.6% as at 31 Mar 2018. 
• Meanwhile, the group continues to turnaround TradeGlobal and seeks to scale its combined US businesses while driving cost leadership across the board.

Well-positioned to capture opportunities

• SingPost is well-positioned to benefit from the strong growth in global eCommerce and last-mile deliveries, and it expects to further benefit from the integration of its eCommerce businesses. Domestic mail volumes are expected to trend downwards while International mail should grow on the back of rising eCommerce volumes. 
• Meanwhile, the group is undergoing structural cost transformation to optimize its cost base. 
• The group has proposed a final dividend of 2.0 S cents, bringing full year dividend to 3.5 S cents, in line with our expectations. This represents a payout ratio of 76% of underlying net profit, and translates to a dividend yield of 2.6% based on the closing price of S$1.33 on 10 May 2018. 
• We tweak our estimates and roll forward our valuations, such that our Fair Value rises slightly from S$1.50 to S$1.53.
• (Maintain BUY)

Low Pei Han OCBC Investment | https://www.iocbc.com/ 2018-05-11

SGX Stock Analyst Report BUY Maintain BUY 1.53 Up 1.500