2010 Apr 09 - OCBC Report - Singapore Post
4
Please refer to the important disclosures at the back of this document. Historical analysis. Charting Singapore Post's (SingPost) share price against the STI reveals that the ratio is currently below its historical average ever since SingPost's IPO in 2003 (Exhibit 1). If one were to hold the view that most of the easy money has been made in the high beta stocks during the stock market rebound since Mar 09, it is then likely that this ratio may stay stable or even rise (i.e. limited downside). We also did a peer comparison and found that SingPost has generally outperformed some of its peers in terms of returns over a five-year period, excluding dividends (Exhibit 2). As the group proceeds with its regional expansion plans and seeks to diversify its businesses, the stock should continue to perform well, assuming no major hiccups. Nature of business both a boon and bane. SingPost's resilient earnings and stable operating cash flows mean that it can weather downturns with ease, and lack of financing should not be a problem with regards to its expansion plans. Besides a cash pile of S$149m as at Dec 09, the group also recently issued S$200m worth of notes that seems well priced amidst a 3x oversubscription rate (refer to earlier report 24 Mar 2010). The onus is on management to avoid over-paying for acquisitions and to make good investment decisions, especially since there is a need to seek new business drivers to sustain growth as the domestic postal industry has limited growth prospects. Industry updates. The stock price of Pos Malaysia [NOT RATED] surged to a 32-month high yesterday after newswires reported that Nationwide Express Courier Service Bhd may be interested in bidding for a stake in the postal company. Pos Malaysia also said it will double the price of postage stamps for standard mail weighing up to 20g to 60 sen starting 1 Jul 2010. Developments should be monitored for insights regarding the value of Pos Malaysia. Maintain BUY. The future of SingPost over the long term hinges heavily on its ability to make astute investment decisions as it seeks new business opportunities. Meanwhile, we also like the group's enthusiasm in pursuing new initiatives in the areas of innovation, social responsibility and its attempts to stay relevant in today's fast changing world. With a total upside potential of about 15% (including dividend of 5.9%), we maintain our BUY rating with a fair value estimate of S$1.16. Singapore Post Ltd SINGAPORE Company Update Results MITA No. 010/06/2009 9 April 2010 Maintain BUY Previous Rating: BUY Current Price: S$1.06 Fair Value: S$1.16 SINGAPORE Company Update MITA No. 010/06/2009 Reuters Code SPOS.SI ISIN Code S08 Bloomberg Code SPOST SP Issued Capital (m) 1,927 Mkt Cap (S$m/US$m) 2,042 / 1,465 Major Shareholders Sing Tel 25.7% Free Float (%) 74.2% Daily Vol 3-mth (‘000) 3,446 52 Wk Range 0,755 - 1.100 Low Pei Han (65) 6531 9813 e-mail: [email protected] Growth rate depends on investment decisions 1000 1500 2000 2500 3000 3500 4000 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 0.2 0.4 0.6 0.8 1.0 1.2 Spore Post STI (S$ m) FY08 FY09 FY10F FY11F Revenue 472.6 481.1 518.3 526.9 EBITDA 198.2 205.0 207.7 217.7 P/NTA (x) 9.1 8.1 10.1 8.3 EPS (cts) 7.8 7.7 8.2 8.5 PER (x) 13.6 13.7 12.9 12.4
Transcript of 2010 Apr 09 - OCBC Report - Singapore Post
Please refer to the important disclosures at the back of this document.
Historical analysis. Charting Singapore Post's (SingPost)
share price against the STI reveals that the ratio is currently
below its historical average ever since SingPost's IPO in 2003
(Exhibit 1). If one were to hold the view that most of the easy
money has been made in the high beta stocks during the
stock market rebound since Mar 09, it is then likely that this
ratio may stay stable or even rise (i.e. limited downside). We
also did a peer comparison and found that SingPost has
generally outperformed some of its peers in terms of returns
over a five-year period, excluding dividends (Exhibit 2). As the
group proceeds with its regional expansion plans and seeks
to diversify its businesses, the stock should continue to
perform well, assuming no major hiccups.
Nature of business both a boon and bane. SingPost's
resilient earnings and stable operating cash flows mean that
it can weather downturns with ease, and lack of financing
should not be a problem with regards to its expansion plans.
Besides a cash pile of S$149m as at Dec 09, the group also
recently issued S$200m worth of notes that seems well priced
amidst a 3x oversubscription rate (refer to earlier report 24
Mar 2010). The onus is on management to avoid over-paying
for acquisitions and to make good investment decisions,
especially since there is a need to seek new business drivers
to sustain growth as the domestic postal industry has limited
growth prospects.
Industry updates. The stock price of Pos Malaysia [NOT
RATED] surged to a 32-month high yesterday after newswires
reported that Nationwide Express Courier Service Bhd may
be interested in bidding for a stake in the postal company.
Pos Malaysia also said it will double the price of postage
stamps for standard mail weighing up to 20g to 60 sen starting
1 Jul 2010. Developments should be monitored for insights
regarding the value of Pos Malaysia.
Maintain BUY. The future of SingPost over the long term hinges
heavily on its ability to make astute investment decisions as
it seeks new business opportunities. Meanwhile, we also like
the group's enthusiasm in pursuing new initiatives in the areas
of innovation, social responsibility and its attempts to stay
relevant in today's fast changing world. With a total upside
potential of about 15% (including dividend of 5.9%), we
maintain our BUY rating with a fair value estimate of S$1.16.
Singapore Post Ltd
SINGAPORE Company Update Results MITA No. 010/06/2009
9 April 2010
Maintain
BUYPrevious Rating: BUY
Current Price: S$1.06Fair Value: S$1.16
SINGAPORE Company Update MITA No. 010/06/2009
Reuters Code SPOS.SI
ISIN Code S08
Bloomberg Code SPOST SP
Issued Capital (m) 1,927
Mkt Cap (S$m/US$m) 2,042 / 1,465
Major Shareholders
Sing Tel 25.7%
Free Float (%) 74.2%
Daily Vol 3-mth (‘000) 3,446
52 Wk Range 0,755 - 1.100
Low Pei Han(65) 6531 9813
e-mail: [email protected]
Growth rate depends on investment decisions
1000
1500
2000
2500
3000
3500
4000
Jan-0
8
Apr-08
Jul-08
Oct-08
Jan-0
9
Apr-09
Jul-09
Oct-09
Jan-1
0
0.2
0.4
0.6
0.8
1.0
1.2Spore
Post
STI
(S$ m) FY08 FY09 FY10F FY11F
Revenue 472.6 481.1 518.3 526.9
EBITDA 198.2 205.0 207.7 217.7
P/NTA (x) 9.1 8.1 10.1 8.3
EPS (cts) 7.8 7.7 8.2 8.5
PER (x) 13.6 13.7 12.9 12.4
Page 2 9 April 2010
Singapore Post Ltd
0.0003
0.00035
0.0004
0.00045
0.0005
0.00055
0.0006
Ma
y 0
3
No
v 0
3
Ma
y 0
4
No
v 0
4
Ma
y 0
5
No
v 0
5
Ma
y 0
6
No
v 0
6
Ma
y 0
7
No
v 0
7
Ma
y 0
8
No
v 0
8
Ma
y 0
9
No
v 0
9
Ra
tio
(x
)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Sin
gP
os
t pric
e (S
$)
SingPost/STI SingPost
Average: 0.0004
Exhibit 1: Historical SingPost/STI ratio
Source: Bloomberg, OIR
-80
-60
-40
-20
0
20
40
60
80
100
Apr 05
Aug 0
5
Dec 0
5
Apr 06
Aug 0
6
Dec 0
6
Apr 07
Aug 0
7
Dec 0
7
Apr 08
Aug 0
8
Dec 0
8
Apr 09
Aug 0
9
Dec 0
9
Apr 10
% r
etu
rn
SingPost
Pos Malaysia
Deutsche Post
UPS
Exhibit 2: SingPost and comparables
Source: Bloomberg, OIR
Page 3 9 April 2010
Singapore Post Ltd
SingPost's Key Financial Data
EARNINGS FORECAST BALANCE SHEET
Year Ended 31 Mar (S$m) FY08 FY09 FY10F FY11F As at 31 Mar (S$m) FY08 FY09 FY10F FY11F
Revenue 472.6 481.1 518.3 526.9 Cash and cash equivalents 104.1 139.5 203.2 252.0
Operating expenses -298.3 -309.5 -345.0 -345.6 Other current assets 77.8 75.7 91.3 90.8
EBITDA 198.2 205.0 207.7 217.7 Property, plant, and equipment 470.8 457.3 449.1 437.9
EBIT 171.9 178.6 182.4 193.1 Total assets 747.4 770.2 841.0 878.2
Net interest expense -8.1 -7.2 -7.4 -7.1 Debt 302.1 303.0 303.0 303.0
Associates 8.2 7.8 1.8 1.8 Current liabilities excluding debt 201.9 194.4 211.5 214.5
Pre-tax profit 175.5 179.1 184.0 192.0 Total liabilities 521.8 514.0 548.5 540.9
Tax -25.8 -29.6 -25.8 -26.9 Shareholders equity 221.4 251.4 287.1 331.4
Minority interests -0.5 -0.7 -0.5 -0.5 Total equity 225.6 256.2 292.5 337.2
Net profit att to shareholders 149.3 148.8 157.8 164.7 Total equity and liabilities 747.4 770.2 841.0 878.2
CASH FLOW
Year Ended 31 Mar (S$m) FY08 FY09 FY10F FY11F KEY RATES & RATIOS FY08 FY09 FY10F FY11F
Op profit before working cap. changes 200.5 205.5 215.8 222.7 EPS (S cents) 7.8 7.7 8.2 8.5
Working cap, taxes and int -26.8 -35.2 -5.3 -32.2 NTA per share (cents) 11.6 13.0 10.5 12.8
Net cash from operations 173.7 170.3 210.5 190.5 EBITDA margin (%) 41.9 42.6 40.1 41.3
Purchase of PP&E -12.8 -14.5 -13.4 -14.1 Net profit margin (%) 31.6 30.9 30.4 31.3
Other investing flows 18.1 6.6 -6.3 1.7 PER (x) 13.6 13.7 12.9 12.4
Investing cash flow 5.3 -7.8 -19.7 -12.4 Price/NTA (x) 9.1 8.1 10.1 8.3
Financing cash flow -143.8 -127.1 -127.2 -129.2 EV/EBITDA (x) 11.3 10.8 10.3 9.6
Net cash flow 35.2 35.4 63.6 48.9 Dividend yield (%) 5.9 5.9 5.9 5.9
Cash at beginning of year 69.0 104.1 139.5 203.2 ROE (%) 67.4 59.2 55.0 49.7
Cash at end of year (incl ODs) 104.1 139.5 203.2 252.0 Net gearing (%) 0.9 0.6 0.3 0.2
Source: Company data, OIR estimates
Page 4 9 April 2010
Singapore Post Ltd
For OCBC Investment Research Pte Ltd
Carmen LeeHead of ResearchPublished by OCBC Investment Research Pte Ltd
SHAREHOLDING DECLARATION:The analyst’s immediate family owns shares in the above security.
RATINGS AND RECOMMENDATIONS:OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and tradingoriented.- However, OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-monthinvestment horizon. OIR’s Buy = More than 10% upside from the current price; Hold = Trade within +/-10%from the current price; Sell = More than 10% downside from the current price.- For companies with less than S$150m market capitalization, OIR’s Buy = More than 30% upside from thecurrent price; Hold = Trade within +/- 30% from the current price; Sell = More than 30% downside from thecurrent price.
DISCLAIMER FOR RESEARCH REPORTThis report is solely for information and general circulation only and may not be published, circulated,reproduced or distributed in whole or in part to any other person without our written consent. This reportshould not be construed as an offer or solicitation for the subscription, purchase or sale of the securitiesmentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in thispublication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy orcompleteness, and you should not act on it without first independently verifying its contents. Any opinion orestimate contained in this report is subject to change without notice. We have not given any considerationto and we have not made any investigation of the investment objectives, financial situation or particularneeds of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and noliability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipientor any class of persons acting on such information or opinion or estimate. You may wish to seek advicefrom a financial adviser regarding the suitability of the securities mentioned herein, taking into considerationyour investment objectives, financial situation or particular needs, before making a commitment to invest inthe securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connectedand associated corporations together with their respective directors and officers may have or take positionsin the securities mentioned in this report and may also perform or seek to perform broking and otherinvestment or securities related services for the corporations whose securities are mentioned in this reportas well as other parties generally.
Privileged/Confidential information may be contained in this message. If you are not the addressee indicatedin this message (or responsible for delivery of this message to such person), you may not copy or deliverthis message to anyone. Opinions, conclusions and other information in this message that do not relate tothe official business of my company shall not be understood as neither given nor endorsed by it.
Co.Reg.no.: 198301152E
