Singapore Post - CGS-CIMB Research 2021-08-10: Another Proxy For Border Reopening

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SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - Another Proxy For Border Reopening

• Singapore’s border reopening in the coming months could lower conveyance costs, which has been a drag on SingPost’s earnings over the past 1.5 years.
• SingPost is already a beneficiary of increased e-commerce adoption; synergistic M&As in Australia could drive further growth ahead.
• Upgrade SingPost to ADD with target price of S$0.77. Valuation undemanding at 1.1 standard deviation below mean while backed by S$201m net cash and S$1bn investment properties.

SingPost's 1QFY22 operational update a non-event

• Singapore Post (SingPost, SGX:S08) reported operating profit of S$21m for 1QFY22 (4QFY21: S$6m, 1QFY21: S$21m), forming 20%/21% of our/consensus FY22F. Results were in line as we project stronger quarters ahead.
• Topline fell 2% y-o-y due to continued weakness in international post and parcel volumes, offset by strength in e-commerce logistics, both in Singapore and Australia. Similarly, EBIT fell 2% y-o-y despite the absence of S$8.3m government grants, thanks to
  1. stronger profits from logistics and property, and
  2. contribution from newly acquired associate Freight Management Holdings (FMH) in Australia.

Singapore border reopening to ease margin pressure

• With the high vaccination rate locally, Singapore is looking severely hit by COVID-19, with operating profit declining 64% y-o-y in FY21.

Pinning hopes on Australia as next leg of growth

• Benefiting from higher e-commerce adoption, SingPost’s Australia operations saw home market there.

Risk-reward improving; upgrade SingPost to ADD

• We think its risk-reward profile is improving with limited downside risks as a longer-term catalyst.
• See
  • SingPost's Share Price,
  • SingPost's Target Price,
  • SingPost's Analyst Reports,
  • SingPost's Dividend History,
  • SingPost's Announcements,
  • SingPost's Latest News.
• We see SingPost as an another proxy for the border reopening theme given its cheap valuation as it is trading at 1.1 standard deviation below mean. Upgrade SingPost from Hold to ADD with target price of S$0.77, still based on 18.8x CY22F P/E (0.5 standard deviation below historical average).
• Potential catalysts include earnings accretive M&As and lity on border opening.
• Downside risks include intensifying competition.

ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-09

SGX Stock Analyst Report ADD UPGRADE HOLD 0.770 SAME 0.770