Singapore Post - OCBC Investment 2021-09-07: A Gradual Recovery Ahead

SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - A Gradual Recovery Ahead

SingPost announced the proposed sale of General Storage Company and its subsidiaries (GSC) (4% of SingPost’s FY21 net profit) to Triforce Investment for S$85.1m. Upon completion of the transaction, which is expected to take place on 15 Oct 2021, GSC will no longer be part of SingPost.
The proposed disposal is estimated to result in a gain of ~S$6m after transaction costs. The proceeds would be redeployed for SingPost’s transformation initiatives and to reposition itself for long term, sustainable growth.

Performance of SingPost was weighed by declining volumes of letters and printed papers in Singapore, and higher conveyance costs for its international post and parcel business, but partially offset by strong e-commerce growth.
For 1QFY22, SingPost’s revenue fell 2% y-o-y to S$353m while operating profit was down 2% y-o-y to S$21m. Margins were under pressure due to low flight capacity at Changi Airport. However, as Singapore plans to reopen its borders progressively, we expect margin pressures to ease as commercial flight volumes at Changi Airport recovers. This could benefit SingPost and support its earnings recovery in FY22, together with strong demand from e-Commerce.

Valuations are undemanding with SingPost’s forward P/E and P/B trading at 18.6x and 0.99x, near 1 standard deviation below its historical average. After adjustments and applying an ESG valuation premium, our fair value estimate for SingPost increases from S$0.74 to S$0.78.

SingPost outperforms its peers in environment, social and governance. SingPost has one of the lowest carbon emission intensities in the industry and also targets to reduce greenhouse gas emissions further by 35% by FY 2030 (vs. FY 2017), with plans to develop electric scooters and use solar energy at its logistics hubs.
In addition, SingPost has strong governance structures that appear to be generally well aligned with investor interests. Moreover, SingPost faces relatively low complexities in labour management, given its relatively small workforce vs industry average and operations in Singapore, where frequency of labour unrest is relatively low.
See

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-09-07

SGX Stock Analyst Report BUY UPGRADE HOLD 0.78 UP 0.740