Singapore Post - OCBC Investment 2022-03-02: Benefiting From Strong E-commerce Growth

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SINGAPORE POST LIMITED (SGX:S08)

Singapore Post - Benefiting From Strong E-commerce Growth

• SingPost's 3QFY22 revenue rose 24% y-o-y and 15% q-o-q.
• Beneficiary of border reopening and strong e- Commerce demand.
• International PP business impacted by COVID-19 disruptions.

SingPost's 3QFY22 business update

• SingPost (SGX:S08)’s 3QFY22 revenue rose 24% y-o-y or 15% q-o-q to S$437m, largely attributable to the consolidation of Freight Management Holdings (FMH), and growth from eCommerce logistics and Famous holdings. Operating expenses rose 23% y-o-y, due to higher volume related expenses in line with higher freight forwarding and eCommerce logistics volume, and the absence of S$6.1m of Jobs Support Scheme. As a result, SingPost's group operating profits rose 46% y-o-y or 20% q-o-q to S$38m in the quarter.

Strong eCommerce logistics growth

• For the domestic Post & Parcel segment (DPP), volume fell 5% y-o-y in 3QFY22, and continued to be dragged by domestic letters and printed papers due to electronic substitution. The decline was partially offset by stronger domestic eCommerce logistics volume (+50% y-o-y) during the year-end peak shopping season and one-off nationwide distribution projections such as for ART kits and mouth gargles.
• Separately, international PP’s volume fell 21% y-o-y, impacted by air freight capacity and conveyance costs due to the COVID-19 disruptions, but partially offset by stronger freight forwarding business. Moreover, following SingPost’s acquisition of FMH to accelerate its investment in Australia, consignment volume in Australia increased 7% y-o-y in 3QFY22.

Undemanding valuations

• Valuations are undemanding with SingPost’s forward P/E and P/B trading at 16.4x and 0.94x, more than 1 standard deviation below its historical average.
• We expect SingPost to continue to benefit from strong e-Commerce demand. While domestic letter mail is likely to remain weak, the decline could potentially be offset by the growth in e-Commerce logistics. As Singapore’s borders reopen progressively and flight capacity normalises, margin pressure on international PP could be gradually eased.
• We maintain our fair value estimate of S$0.78 for SingPost.
• See
  • SingPost's Share Price,
  • SingPost's Target Price,
  • SingPost's Analyst Reports,
  • SingPost's Dividend History,
  • SingPost's Announcements,
  • SingPost's Latest News.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2022-03-02

SGX Stock Analyst Report BUY MAINTAIN BUY 0.780 SAME 0.780