Singapore Post - OCBC Investment 2020-05-11: Headwinds From COVID-19

SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - Headwinds From COVID-19

SingPost (SGX:S08)’s 4QFY20 revenue fell 2.7% y-o-y to S$312.2m, mainly attributable to a 5.7% y-o-y decline for the Post & Parcel segment, partially offset by growth in the Logistics segment (+5.3% y-o-y).
Bottomline turned from a net loss of S$75.1m in 4QFY19 to PATMI of S$7.2m this quarter due to the absence of significant impairment losses from US subsidiaries recorded last year.
For FY20, underlying net profit was flat at S$100.2m, which accounted for 94% of our full year estimate and was below our expectations.
Meanwhile, a final dividend of S$0.012/share (-40% y-o-y) has been declared. Together, total dividend for FY20 dropped 23% y-o-y to S$0.027/share, representing a payout ratio of 60%, which is at the lower end of SingPost’s dividend policy of 60-80% of underlying net profit for the year.

On a segmental basis, the Post & Parcel’s performance was adversely impacted by COVID-19. Revenue and operating profit fell 5.7% and 47.7% y-o-y respectively in 4Q, driven by a 15.4% y-o-y fall in Domestic revenue and higher costs. Domestic admail volume was weak in 4Q and letter mail volumes continued to see double-digit percentage fall in volumes while domestic eCommerce-related volumes continued to grow.
For International Post and Parcel, its business was weighed by the disruption of global supply chains and higher conveyance costs amid COVID-19. In the Logistics segment, its revenue was up 5.3% y-o-y while operating profit registered a lower loss of S$2.2m, as compared to S$6.4m loss in 4QFY19.
Separately, the performance of the Property segment remained largely stable with revenue up 0.1% y-o-y while operating profit was down 0.8% to S$13.2m. While management noted that the SingPost Center remained at close to full occupancy rate, we see the risk of lower rental reversions and occupancy if COVID-19 continues.

Moving ahead, we expect margins to remain under pressure as a result of higher conveyance costs due to border closures, higher terminal dues, and higher business costs amid Circuit Breaker and Malaysia’s Movement Control Order.
While we see improvement in Logistics segment this quarter, businesses might be impacted by lower overall demand from economic slowdown.
See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.
After adjustments, our fair value estimate is revised from S$0.96 to S$0.80.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-05-11

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