Singapore Post - OCBC Investment 2020-02-10: More Of The Same


Singapore Post - More Of The Same

  • Underlying net profit was in-line.
  • Post & Parcel and Logistics segments remained weak.
  • Property segment’s performance was stable.

3QFY20 revenue fell 2.0% y-o-y and underlying net profit fell 5.1%

  • Singapore Post (SGX:S08)’s 3QFY20 revenue fell 2.0% y-o-y to S$355.9m, continued to be dragged by lower revenue from Domestic Post & Parcel and freight forwarding, partially offset by record revenue of S$159m from International Post & Parcel.
  • Net profit decreased by 39.3% y-o-y to S$30.5m, due to the absence of the S$31.8m of exceptional gain on dilution of interest in 4PX recorded last year.
  • Excluding one-off items, underlying net profit fell 5.1% to S$31.2m, such that 9MFY20 underlying net profit accounted for 77% of our full year estimate and was in line with our expectations.

Letter mail volumes remained weak while domestic eCommerce continued to grow

  • On a segmental basis, the Post & Parcel segment reported a 0.8% and 19.9% y-o-y decline in revenue and operating profit respectively for 3Q, driven by a 13.8% y-o-y fall in Domestic revenue and higher costs. Domestic eCommerce-related volumes continued to grow while domestic letter mail volumes remained weak in 3Q, which saw an accelerated double-digit percentage fall in volumes.
  • In the Logistics segment, its revenue was down 1.9% y-o-y, largely attributable to lower freight forwarding revenue, the weakness in the Australian dollar, as well as additional impact from the bushfires. Logistics continued to report a loss of S$0.7m operating profit but the loss was narrowed from S$0.9m in 2Q to S$0.7m in 3QFY20.
  • The performance of the Property segment remained largely stable with revenue down 0.5% y-o-y while operating profit was flat at S$13.9m.

Lower Fair Value estimate of S$0.96

  • We continue to see the decline in letter mails this quarter and are likely to see this structural headwind to continue. While we see domestic eCommerce-related volumes growing double-digit, it grew from a much lower base than that of letter mail which continued to form the majority of revenue and volume.
  • Management disclosed that the novel coronavirus has not had a material impact to the business yet. However, there could be a negative impact on global supply chain if the situation escalates and management will monitor the situation closely.
  • See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.
  • After factoring the discontinuation of U.S. eCommerce businesses and adjustments to our cost assumptions, our fair value estimate is revised from S$1.02 to S$0.96.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-02-10
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.96 DOWN 1.020