Singapore Post - OCBC Investment 2018-08-06: Time Needed For A Large Delivery

SGinvestors.io

SINGAPORE POST LIMITED SGX:S08

Singapore Post - Time Needed For A Large Delivery

• 9.8% y-o-y decline in underlying profit.
• Continues transformation programme.
• Gradual recovery.

1QFY19 bottom-line impacted by one-off items

• Singapore Post (SingPost) saw a 3.3% y-o-y rise in revenue to S$372.6m and a 40.8% fall in net profit to S$16.9m in 1QFY19, impacted by exceptional fair value losses from warrants in an associated company (GDEX) of about S$6.0m.
• Stripping out one-off items, underlying net profit fell by a smaller 9.8% to S$24.7m in the quarter.
• The improved operating profit performance before exceptional items was offset by lower associates’ contribution and higher taxes. On a sequential basis, however, underlying net profit was higher by 61.6% q-o-q. 
• Net operating cash flow was strong at S$71.3m in 1QFY19, compared to S$58.4m in 1QFY18 and S$53.0m in 4QFY18. The group also saw an improved net cash position of S$129m.

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Still supported by traditional businesses; investing in new growth areas

• On a segmental basis, post and parcel saw a 3.8% y-o-y decline in operating profit to S$41.8m while logistics broke even with S$0.1m operating profit vs. loss of S$2.5m last year. 
• eCommerce continued to incur operating losses, with -S$9.3m in 1QFY19 compared to -S$4.8m last year. This was largely due to the US businesses which experienced pricing pressures, change in sales mix from higher margin fulfillment services towards lower margin freight services, as well as an increase in technical labour cost to support business integration. 
• Under Property, operating profit rose 67.1% to S$13.2m, boosted by rental income from the SingPost Centre retail mall.

Well-positioned to capture opportunities; but also requires time

• SingPost is well-positioned to benefit from the strong growth in global eCommerce and last-mile deliveries, but time is also required for the execution of plans and synergies to be reaped.
• The US market remains challenging, and the group continues to focus on its turnaround plan and the coming peak season. 
• Still, we are positive on the group’s longer term prospects; our fair value estimate eases slightly from S$1.53 to S$1.50 after a fine-tuning of estimates.

Low Pei Han OCBC Investment Research | https://www.iocbc.com/ 2018-08-06

SGX Stock Analyst Report BUY Maintain BUY 1.50 Down 1.530