SINGAPORE POST LIMITED (SGX:S08)
Singapore Post - Profit Bottoms Out In 1HFY21; Slow Recovery Ahead
SingPost's 1HFY21 underlying profit of S$31.5m (-40% y-o-y) was 25% below our expectations.
- SingPost (SGX:S08)'s 1HFY21 net profit declined by 42.1% to S$30.9m in 1H21, and the group recorded an underlying net profit of S$31.5m, down 40% from the previous year. The main culprit was a sharp rise in volume-related costs which rose by 27% y-o-y to S$429m compared to group revenue rising by only 10% to S$708m. This was mainly due to fewer number of passenger flights operating at Changi Airport.
- SingPost uses passenger flights for shipment of international mail and was forced to use sub-optimal routes to deliver those packages, resulting in 2-3x of normal costs.
- For 1HFY21, SingPost has announced an interim dividend of 0.5 cents per share, translating into 36% payout ratio.
Logistics staged a turnaround.
- SingPost's logistics segment delivered a strong turnaround to a profit of S$5.7m for 1HFY21, from a loss of S$3.5m in the same period last year. CouriersPlease, Quantium Solutions and SP eCommerce experienced robust growth as a result of increased adoption of e-commerce activities in Asia-Pacific.
- In particular, CouriersPlease saw solid volume growth in Australia, with revenue rising 48% for 1HFY21. Both Quantium Solutions and SP eCommerce continue to benefit from the reengineering of processes to improve customer experience, efficiency, and scalability. This has resulted in more customers taking up their suite of eCommerce logistics solutions which include warehousing and fulfilment, as well as front-end solutions.
Property segment showed marginal decline in operating profit.
- For SingPost's property segment, which comprises commercial property, rental and self-storage business, revenue declined 7.8% to S$55.5m in the half-year, largely due to rental rebates provided for eligible tenants amounting to about S$3.2m, as well as lower receipts from car park and atrium sales.
- Correspondingly, profit on operating activities fell 11.4% to S$23.7m. In the first quarter of the financial year, SingPost Centre retail mall saw a substantial decline in footfall due to the Circuit Breaker measures. Many tenants had to temporarily close as a result, but this has since recovered with the gradual reopening and easing of safe management measures over the past few months.
Maintain FULLY VALUED
- Maintain FULLY VALUED on SingPost with a lower target price of S$0.60, representing c.14x FY22F PE, which is near -2 SD of its 4-year average PE multiple. We use discounted cash flow valuation (WACC 7%, terminal growth 3%) to derive our target price.
- See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.
Sachin MITTAL
DBS Group Research
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Rui Wen LIM
DBS Research
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https://www.dbsvickers.com/
2020-11-09
SGX Stock
Analyst Report
0.60
DOWN
0.640
