SINGAPORE POST LIMITED (SGX:S08)
Singapore Post - 1QFY21 ~ Mixed Quarter
- SingPost's 1QFY21 (Apr 2020 to Jun 2020) operating profit of S$22m improved from last quarter’s S$12m, but still fell 49% y-o-y and was below our and consensus’ expectations.
- Accelerated domestic mail decline, higher terminal dues and conveyance costs weighed on postal margins; ecommerce logistics showed a turnaround.
- Maintain ADD with lower FY21-23F EPS and S$0.77 Target Price.
- SingPost has a c.4% dividend yield and S$223m net cash as of end-1QFY21.
SingPost's 1QFY21 operational updates; operating profit a miss
- In its 1QFY21 (Apr 2020 to Jun 2020) business update, SingPost (SGX:S08) reported an operating profit of S$22m (4QFY20: S$12m, 1QFY20: S$42m), deemed below expectations at 18%/16% of our/consensus’ full-year forecasts.
- Despite a 12% y-o-y increase in topline, thanks to higher international mail revenue (+30% y-o-y) and ecommerce logistics contribution (+17% y-o-y), operating profit fell 49% y-o-y on the back of higher costs, which was partially offset by the job support scheme (JSS).
- No interim DPS was declared as SingPost had previously transitioned into half-yearly reporting.
Ecommerce growth masked by domestic weakness
- We saw no reprieve in the accelerated decline of domestic mail in 1QFY21, as revenue was 14% lower y-o-y (4Q20: -15.4%, 1Q20: -4.2%). With the revenue shift towards more international mail (74% vs. 68% in 4Q20), and higher terminal dues and conveyance costs, postal OPM fell significantly to 6.7% (4Q20: 10.1%, 1Q20: 20.1%). However, SingPost also benefitted from virus-induced ecommerce growth, with volumes surging 52% y-o-y and now accounting for almost 10% of all domestic deliveries (1QFY20: 3.8%).
- Cross-border ecommerce volumes also rose y-o-y, which underpinned logistics’ profitability turnaround from a S$2m operating loss in 1QFY20 to a S$3m operating profit in 1QFY21.
Lower property income on rental rebates not a surprise
- SingPost recorded a 16% y-o-y drop in property income, mainly due to rental rebates to tenants and slower shopper traffic; we expect a recovery in 2HFY21F. Committed occupancy at its Singpost Centre mall and office/enrichment held steady at 100% and 98% respectively, as at Jun 20.
Maintain ADD on longer-term recovery and ecommerce proxy
- We cut our FY21-23F EPS by 8.9-12.9% on weaker postal margins. Our target price falls to S$0.77 which is now based on 0.5 s.d below its historical mean of 17.3x FY22F P/E (previously DCF valuation, 7.4% WACC).
- Maintain ADD on SingPost for longer-term trade recovery and proxy to ecommerce trends, supported by a c.4% dividend yield and net cash of S$223m (as at Jun 20). Elevated terminal dues and air freight rates would pose downside risks to our ADD rating.
- See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.
- Re-rating catalysts: faster lifting of international travel restrictions and successful transformation on its Future of Post initiative.
NGOH Yi Sin
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-08-11
SGX Stock
Analyst Report
0.77
DOWN
0.850
