Singapore Post - DBS Research 2021-02-05: 3-4% Yield While Waiting For Structural Growth


Singapore Post - 3-4% Yield While Waiting For Structural Growth

  • Better-than-expected 3QFY21 operating profit on tighter cost management; Some improvement seen in Logistics.
  • Structural pressure on Post & Parcel segment may persist for 18-24 months, despite a sharp rebound in FY22F due to recovery from COVID.
  • Upgrade SingPost to HOLD, revise target price to S$0.74.

Singapore Post reported better-than-expected 3QFY21 operating profit

Better than expected 3QFY21 operating profit on tighter cost management.

  • SingPost (SGX:S08)'s 3QFY21 operating profit of S$26m (+41% q-o-q, -38% y-o-y,) was ahead of our S$24m estimate in a seasonally strong quarter. 9M21 operating profit of S$66m comprised 78% of our FY21F operating profit projection of S$85m.
  • The surprise came from SingPost’s better cost management in two key areas.
    • Firstly, SingPost continues to discourage some of its international P&P business (volumes - 25% y-o-y, +1% q-o-q) which has seen a sharp rise in costs due to fewer flights operating from Changi airport leading to expensive re-routing.
    • Secondly, the logistics business continues to deliver well after staging a turnaround in 1H21.

Overall, group revenue of S$351m (-1% y-o-y, +1% q-o-q) was driven by growth in the Logistics segment.

  • Last mile Australian entity - Couriers Please and its freight forwarding entity, Famous Holdings, recorded revenue growth on the back of higher volumes. In the P&P segment, domestic revenue rose q-o-q, as revenue growth from eCommerce deliveries more than offset the decline from letters and printed papers.

Zooming into Post and Parcel (P&P) segment.

  • While domestic P&P eCommerce volume increased 11% q-o-q/36% y-o-y overall to 10.3 million items in 3QFY21 in part due to peak shopping season, volumes of letters and printed papers in

Singapore continue to decline on the back of e-substitution.

  • On the other hand, international air freight disruptions raised conveyance costs, impacting the international P&P business which saw 6.1 million kg volumes (+3% q-o-q, -25% y-o-y).

Updates on property segment.

  • Retail mall continues to see improving footfall traffic and tenant sales. According to SingPost, committed occupancy at SPC Mall and Office dipped slightly to 99.8% and 98.1% as of Dec 2020, from 100% and 99.1% in Sep 2020, as the majority of leases expiring during the year had been renewed or replaced.

Upgrade Singapore Post to HOLD

Sachin MITTAL DBS Group Research | Rui Wen LIM DBS Research | https://www.dbsvickers.com/ 2021-02-05
SGX Stock Analyst Report HOLD UPGRADE FULLY VALUED 0.74 UP 0.600