Singapore Post - DBS Research 2020-08-12: Challenges Abound

SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - Challenges Abound

SingPost's operating profit fell 49% y-o-y to S$22m in 1QFY21 on higher costs, provisions - below our S$28m expectations.
International mail and domestic eCommerce volumes growth unable to offset drop in domestic letter volumes; operating profit for post and parcel continues to decline.
Property segment hit by impact from COVID-19.

SingPost (SGX:S08)'s group revenue improved 12% y-o-y/15% q-o-q to S$360m, led by decent growth in cross-border eCommerce delivery volumes in International Post and Parcel, CouriersPlease and Quantium Solutions subsidiaries. However, due to increase in costs arising from supply chain disruptions and terminal dues during the quarter (partially offset by Jobs Support Scheme subsidies), operating profit fell -49% y-o-y/ +3% q-o-q to S$22m. We like to highlight there is downside risk to our FY21F operating profit projection of S$125m (-5.3% y-o-y).

During the quarter, eCommerce related volumes across domestic and international segment increased 52% and 30% y-o-y respectively but domestic letter and printed paper volume declined 52% y-o-y.
Overall, Post & Parcel segment’s revenue increased to S$215m (+15% y-o-y/ +21% q-o-q) but operating profit for the post and parcel segment fell 63% y-o-y and 22% q-o-q to S$14m.

While SPC Mall and SPC Office/ enrichment’s committed occupancy continues to be at 100% and 98% respectively as of June 20 (unchanged from March 20), operating profit declined 15% y-o-y and 17% q-o-q to S$11m on lower footfall during circuit breaker as well as financial assistance provided to tenants during the quarter, which will continue into the next quarter.

During the quarter, SingPost benefitted from CouriersPlease’s operations in Australia which expanded due to movement restrictions during the quarter, while Famous Holdings’ freight forwarding business was hit by impact from slowdown in trade.

Maintain FULLY VALUED, Target Price S$0.64. According to SingPost, there may be volumes temporarily being diverted away from Singapore by some of its key customers due to disruption in international air freight out of Changi Airport.
We continue to believe that accelerated slowdown in domestic letter volumes is likely to weigh on the segment’s profitability which is unable to be replaced by eCommerce and international mail volumes in the meantime.
See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.
Our Target Price of S$0.64 represents c.17x FY21F PE, which is below -1.5 SD of its 4-year average PE multiple.

Sachin MITTAL DBS Group Research | Rui Wen LIM DBS Research | https://www.dbsvickers.com/ 2020-08-12

SGX Stock Analyst Report FULLY VALUED MAINTAIN FULLY VALUED 0.640 SAME 0.640