Singapore Post - OCBC Investment 2021-04-15: Focusing On Driving E-Commerce Growth

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SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - Focusing On Driving E-Commerce Growth

• eCommerce continued to drive revenue growth.
• Higher conveyance costs could weigh on margin.
• Transformation underway to maintain sustainability.

SingPost's share price rose on restructuring speculation

• SingPost's share price rose ~8% month-to-date in April as investors viewed it as a potential restructuring play following SPH (SGX:T39) and CapitaLand (SGX:C31)’s strategic review and proposed restructuring. We are currently not aware of any material change in SingPost’s operations and guidance.
• We note that SingPost had undertaken a series of restructuring exercises to step up its transformation and growth in the digital age in recent years. For example, SingPost exited its US business in 2019 and reclassified the reporting of its business under three key business segments.
• In addition, SingPost has stepped up investment to improve service quality and continued its efforts to transform its logistics and eCommerce businesses.

Margin pressure to continue

• SingPost continued to face headwinds from declining volumes of letters and printed papers in Singapore, and higher conveyance costs for its international post and parcel business.
• Moving ahead, we expect margins to remain under pressure due to higher conveyance costs and SingPost may be unable to pass the costs to its customers.

Strong growth in eCommerce volumes

• On the other hand, SingPost saw strong growth in eCommerce volumes in Singapore and Australia in 3QFY21. eCommerce volume rose 11% q-o-q and 36% y-o-y for domestic post and parcel as more people chose SingPost as their preferred provider for eCommerce deliveries.
• SingPost's logistics segment also benefitted from a strong growth in eCommerce volumes in Australia (+9% q-o-q and +74% y-o-y) due to increased eCommerce adoption, partly driven by COVID-19.
• After adjustments, our fair value estimate for SingPost increases from S$0.71 to S$0.74.
• See SingPost Share Price; SingPost Target Price; SingPost Analyst Reports; SingPost Dividend History; SingPost Announcements; SingPost Latest News.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-04-15

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.74 UP 0.710