Accumulate Singapore Post Ltd Catering for growth with new Regional

15 October 2014
Singapore Post Ltd
Catering for growth with new Regional
eCommerce Logistics Hub
SINGAPORE | FREIGHT & COURIER SERVICES| UPDATE
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Developing fully integrated eCommerce Logistics Hub in Singapore to
cater to expanding ecommerce logistics business and rapid ecommerce
market growth.
Project is estimated to cost S$182 million and is expected to complete by
end Jan 2016; development will be funded internally from Group’s cash
holdings.
We viewed the new hub development positively, indicating huge growth
potential in SingPost’s ecommerce logistics business.
Maintain TP at S$2.07; revised rating to Accumulate as share price moved
closer to our TP since our initiation on 12 Sep-14.
What is the news?
SingPost has recently announced it will be developing a fully integrated regional
eCommerce Logistics Hub to cater to its expanding ecommerce logistics business
as well as to address global growth in ecommerce market. Located in Tampines
LogisPark, the 553,000 sqf hub comprises 3-storey integrated centre, with fully
automated parcel sorting facility and 2 warehousing floors, and an adjoining 8storey office block to house SingPost’s local and regional logistics operations. The
logistics hub and adjacent office building will be built on land leased from JTC
corporation for 30 years. Construction of the new hub is expected to complete by
end Jan 2016. The development cost for the new hub is estimated to cost S$182
million and will be funded internally from the Group’s cash holdings.
How do we view this?
SingPost has a net cash of S$210m (ex S$350m perpetual securities) as of end Jun14, giving an excess of S$28m after internal financing of the new logistics hub.
With an estimated FY15F cash flow from operations (over S$200m) more than
sufficient to meet both dividends to shareholders as well as distributions to
perpetual securities holders, we think SingPost would unlikely be gearing up in the
short run as it continues its ongoing S$100 investment in postal service and
infrastructure enhancement. We view the new eCommerce Logistics Hub
development positively, signalling significant growth potential in SingPost
ecommerce business.
Accumulate
(Revised from Buy)
Target Price (SGD)
2.070
Forecast Dividend (SGD)
0.063
Closing Price (SGD)
1.815
Potential Upside
17.5%
Company Description
Si nga pore Pos t Li mi ted i s the na ti ona l pos ta l
s ervi ce provi der i n Si nga pore. The Compa ny
provi des domes ti c a nd i nterna ti ona l pos ta l
a nd couri er s ervi ces i ncl udi ng end-to-end
i ntegra ted ma i l s ol uti ons coveri ng da ta
pri nti ng,
l etter-s hoppi ng,
del i very a nd
ma i l room
ma na gement,
a nd
others .
Si nga pore Pos t a l s o offers end-to-end ecommerce l ogi s ti cs s ol uti ons
Company Data
Raw Beta (Past 2yrs weekly data)
0.43
Market Cap. (USD mn / SGD mn)
3019 / 3851
Ent. Value (USD mn / SGD mn)
3128 / 3986
3M Average Daily T/O (mn)
4.99
Closing Px in 52 week range 1.27
1.89
2.00
1.80
Volume, mn
SPOST SP Equity
STI (rebased)
80
70
60
50
40
30
20
10
0
1.60
1.40
1.20
1.00
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Investment Action
As the hub would only be ready in 2016, we do not foresee much impact on
revenue and margins in the current and the next fiscal year. We make an
adjustment on FY15F/16F capex and maintain our TP at S$2.07. While we
continue to be positive on the growth prospects, valuation may seem a little
stretched at current share price, with forward PE at ~26.5x (impacted by dilution
effects on EPS from new share issuance to Alibaba). We revise our rating to
Accumulate.
Rating:
Major Shareholders
1. Si ngTel Ltd
2. Al i ba ba Inves tment Ltd
3. Aberdeen As s et Ma na gement
(%)
23.4
10.4
2.5
Valuation Method
DCF (WACC: 6.2%; termi na l g: 2.0%)
Analyst
Colin Tan
col i nta nwh@phi l l i p.com.s g
+65 6531 1221
Page | 1
MCI (P) 046/11/2013
Ref. No.: SG2014_0158
Singapore Post Ltd
15 October 2014
FYE Mar
Income Statement (SGD mn)
Revenue
EBITDA
Depreci a ti on & Amorti s a ti on
EBIT
Net Fi na nce (Expens e)/Inc
As s oci a tes & JVs
Excepti ona l i tems
Profit Before Tax
Ta xa ti on
Profit After Tax
Mi nori ty i nteres t
Net Income, reported
Net Income, adj.
Attri b. to perpetua l s ecuri ti es
Attrib. to ordinary shareholders
FY12
FY13
FY14 FY15F FY16F
579
216
(30)
186
(13)
1
0
174
(32)
142
(0)
142
135
0
135
659
215
(36)
178
(14)
2
0
167
(30)
137
(0)
136
141
15
126
821
216
(35)
181
(7)
4
0
179
(34)
145
(2)
143
145
15
130
FYE Mar
Per share data (SGD)
EPS, reported
EPS, a dj.
DPS
BVPS
FY12
FY13
FY14 FY15F FY16F
0.074
0.071
0.063
0.166
0.064
0.067
0.063
0.169
0.067
0.069
0.063
0.182
FYE Mar
FY12
Cashflow statements (SGD mn)
CFO
Profi t before ta x
174
Adjus tments
33
WC cha nges
3
Ca s h genera ted from ops
210
Ta xes pa i d
(33)
Cashflow from ops
177
CFI
CAPEX, net
(26)
Others
(51)
Cashflow from investments
(77)
CFF
Sha re i s s ua nce
1
Loa ns , net of repa yments
0
Di vi dends pa i d
(119)
Others
297
Cashflow from financing
179
Net change in cash
279
Effects of excha nge ra tes
0
CCE, end
617
Source: Compa ny Da ta , PSR es t
FY13
FY14 FY15F FY16F
167
42
24
233
(30)
203
179
37
56
271
(29)
242
193
34
21
248
(27)
220
200
40
12
252
(37)
214
(13)
(39)
(52)
(38)
0
(38)
(125)
(14)
(139)
(172)
0
(172)
1
(0)
(118)
(22)
(140)
11
0
628
7
3
(119)
(319)
(428)
(224)
0
404
4
0
(124)
(21)
(141)
(60)
0
345
0
0
(133)
(21)
(155)
(112)
0
232
909
228
(33)
194
(6)
4
0
193
(36)
157
(2)
155
155
15
140
0.068
0.068
0.063
0.172
960
240
(38)
202
(6)
5
0
200
(37)
162
(2)
161
161
15
146
0.068
0.068
0.063
0.178
FYE Mar
Balance Sheet (SGD mn)
PPE
Inta ngi bl es
As s oci a tes & JVs
Long term i nves tments
Others
Total non-current assets
Inventori es
Accounts Recei va bl es
Inves tments
Ca s h
Others
Total current assets
Total Assets
Short term l oa ns
Accounts Pa ya bl es
Others
Total current liabilities
Long term l oa ns
Others
Total non-current liabilities
Non-control l i ng i nteres t
Perpetua l s ecuri ti es
Shareholder Equity
FYE Mar
Valuation Ratios
P/E (X), a dj.
P/B (X)
EV/EBITDA (X)
Di vi dend Yi el d (%)
Growth & Margins (%)
Growth
Revenue
EBITDA
EBIT
Net Income, a dj.
Margins
EBITDA ma rgi n
EBIT ma rgi n
Net Profi t Ma rgi n
Key Ratios
ROE (%)
ROA (%)
Net Debt/(Ca s h) a dj.
Net Gea ri ng (X)
FY12
FY13
238
236
88
186
91
94
206
234
8
13
631
763
2
4
95
130
75
17
617
628
10
12
799
791
1,430 1,554
0
316
211
271
34
32
246
620
506
220
19
46
525
267
(0)
0
347
347
313
321
FY14 FY15F FY16F
234
184
98
243
8
766
5
127
6
404
13
556
1,322
14
294
43
352
220
54
274
2
347
347
329
180
102
255
10
876
5
146
8
345
13
517
1,393
14
335
51
400
220
56
276
4
347
367
467
176
107
255
10
1,014
6
155
8
232
13
413
1,427
14
355
51
420
220
56
276
6
347
379
FY12
FY13
FY14 FY15F FY16F
12.7
5.4
8.9
7.0%
18.7
7.4
12.3
5.0%
21.3
8.0
13.8
4.3%
26.6
10.6
17.5
3.4%
26.5
10.2
16.6
3.4%
2.2% 13.9% 24.6% 10.6%
-8.1% -0.8% 0.4% 5.6%
-11.3% -4.2% 1.5% 7.4%
-9.5% 4.1% 2.9% 6.7%
5.7%
5.3%
3.6%
3.8%
37.4% 32.6% 26.3% 25.1% 25.0%
32.2% 27.1% 22.1% 21.4% 21.0%
24.6% 20.7% 17.6% 17.2% 16.9%
42.4% 44.5% 43.5% 43.4% 43.1%
10.7% 9.4% 10.1% 11.4% 11.4%
235
0.8
255
0.8
177
0.5
236
0.6
349
0.9
*Forward multiples and yields are based on current price; historical multiples and yields are based on historical prices
Page | 2
Singapore Post Ltd
15 October 2014
Ratings History
Market Price
Target Price
2.30
2.10
1.90
1.70
1.50
1.30
1.10
0.90
0.70
0.50
Source: Bl oomberg, PSR
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
1
2
3
4
5
PSR Rating System
Total Returns
Recommendation Rating
> +20%
Buy
1
+5% to +20%
Accumul a te
2
-5% to +5%
Neutra l
3
-5% to -20%
Reduce
4
<-20%
Sel l
5
Remarks
We do not ba s e our recommenda tions entirel y on the a bove qua ntitative
return ba nds . We cons i der qua l i tative fa ctors l i ke (but not l i mi ted to) a s tock's
ri s k rewa rd profi l e, ma rket s entiment, recent ra te of s ha re pri ce a ppreci a tion,
pres ence or a bs ence of s tock pri ce ca tal ys ts , a nd s pecul a tive undertones
s urroundi ng the s tock, before ma ki ng our fi na l recommenda tion
Page | 3
Singapore Post Ltd
15 October 2014
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Singapore Post Ltd
15 October 2014
Contact Information (Singapore Research Team)
Management
Chan Wai Chee
(CEO, Research - Special Opportunities)
Joshua Tan
(Head, Research - Equities & Macro)
Macro | Equities
Soh Lin Sin
Bakhteyar Osama
+65 6531 1516
+65 6531 1793
Finance | Offshore Marine
Benjamin Ong
+65 6531 1535
Telecoms | Technology
Colin Tan
+65 6531 1221
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+65 6531 1231
+65 6531 1249
Market Analyst | Equities
Kenneth Koh
+65 6531 1791
Real Estate
Caroline Tay
US Equities
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