Singapore Post - DBS Research 2020-09-17: Seeking Higher Volume Growth

SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - Seeking Higher Volume Growth

Ongoing streamlining of operations and services.
Most categories see lower rates.
SingPost continues to seek to arrest declining domestic letter mail operating profit.

Flattened pricing structure; ongoing streamline of products and services. Singapore Post (SingPost, SGX:S08) has announced changes to its delivery pricing structure.
Packages are currently charged according to weight. With the changes, domestic package charges will be reduced to a flat rate across all weight categories up to 2kg while postage-paid products, Poly M and SmartPac will see flattened pricing structures. International package services and Speedpost international services will be flattened further to two categories with flattened pricing structures as well.

Notably, SingPost has also reduced turnaround time for basic packages to be delivered to the letterbox within two working days (previously three working days).
We believe the faster turnaround time promised may signal ongoing operational improvements as SingPost has been working to improve its operational processes.

With the exception of basic packages under 500g, all basic and tracked packages as well as postage-paid products will see lower rates across the board. We believe SingPost may be able to seek higher volumes with the more competitive rates going forward, as it seeks to capitalise on increasing small package deliveries locally and internationally, riding on the volume growth of eCommerce packages.

As SingPost continues to streamline its operations, we believe the changes may enable the company to seek higher volume growth with lower delivery rates. SingPost seeks to arrest decline in domestic letter mail operating profit with increase in contribution from domestic packages. We note that some players in the sector continue to undercut each other to gain market share and believe there may still be heated competition locally between the players as package volumes continue to ride on the eCommerce volume growth.
See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.
We maintain our FULLY VALUED rating on SingPost due to lack of near-term catalysts.
Key catalysts include stabilisation of post and parcel operating profit.

Sachin MITTAL DBS Group Research | Rui Wen LIM DBS Research | https://www.dbsvickers.com/ 2020-09-17

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