2011 Jan 31 - Kim Eng - Singapore Post
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SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 090/11/2009 Services | 31 January 2011 HOLD Singapore Post 3QFY11 Results Still waiting for fresh catalysts Analyst Gregory YAP [email protected] (65) 6432 1450 Price $1.17 Target $1.29 ST Index 3,229.69 Historical Chart 1.00 1.05 1.10 1.15 1.20 1.25 01‐Feb‐10 01‐Mar‐10 29‐Mar‐10 26‐Apr‐10 24‐May‐10 21‐Jun‐10 19‐Jul‐10 16‐Aug‐10 13‐Sep‐10 11‐Oct‐10 08‐Nov‐10 06‐Dec‐10 03‐Jan‐11 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Vol ('000) Price ($) Performance 1m 3m 6m Absolute (%) ‐1.7 ‐1.7 1.8 Relative (%) ‐1.6 ‐3.1 ‐4.7 Stock Information Ticker code SPOST.SI SPOST SP Market cap (US$m) 1,757.0 52‐week high (S$) 1.24 52‐week low (S$) 1.01 Shares issued (m) 1,921.4 6m avg d.vol (US$m) 5.6 Free float (%) 66.3 Major shareholders (%) Temasek (25.7), Capital Group (8.0) Key Indicators ROE (%) 54.9 Net gearing (%) 51.2 NTA (S$) 0.12 Interest cover (x) 15.6 Event SingPost did as well as can be expected. In other words, we expected its mail business to reflect the current economic strength, and it did. But the logistics and retail businesses did not do so well profit‐wise due to lower margin components coming to the fore. If this is the best it can do despite the economy firing on all cyclinders, then it needs to move faster on its regionalisation and diversification plans. Perhaps the recent management restructuring will speed things along. Meanwhile, HOLD for the yield of 5+%. Our View Net profit of $43.8m was flat YoY. Underlying net profit, excluding one‐off items such as the $2.9m amortisation of deferred gain on IP rights and benefits from the Jobs Credit scheme which ended in June 2010, was lower at $40.9m, though still 5% higher from a year ago. The usual quarterly dividend of 1.25 cents was also declared. Mail business did the best on stronger domestic, international and hybrid mail volume, with EBIT growth outpacing revenue growth. However, Logistics margins were affected by lower margin activities such as transhipment as opposed to higher margin customised logistics, while Retail profit fell on lower agency and retail activities. Perhaps sensing investors’ impatience with its long‐promised regionalisation and diversification, SingPost recently appointed two CEOs. An ex‐McKinsey consultant will now accelerate its expansion in the region and diversify into non‐postal businesses. Incumbent CEO Ng Hin Lee will lead postal services and strategic acquisitions. Action & Recommendation We maintain our HOLD recommendation, mainly for the yield of 5%. Our target price has been raised to $1.29 as we roll over to FY12, still on 15x target PE. Year End Mar 31 2009 2010 2011F 2012F 2013F Sales (S$'m) 481.1 525.5 567.0 579.5 592.3 Net profit (S$'m) 148.8 165.0 161.3 166.2 170.5 Underlying net profit (S$'m) 147.3 147.7 161.3 166.2 170.5 EPS (S cts) 7.7 8.1 8.4 8.6 8.8 EPS growth (%) ‐0.5 5.0 3.1 3.1 2.6 PER (x) 15.4 14.7 14.2 13.8 13.5 EV/EBITDA (x) 11.9 10.4 10.2 9.8 9.3 Yield (%) 5.3 5.3 5.3 5.3 5.3
Transcript of 2011 Jan 31 - Kim Eng - Singapore Post
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 090/11/2009
Services | 31 January 2011
HOLD Singapore Post 3QFY11 Results Still waiting for fresh catalysts Analyst Gregory YAP [email protected] (65) 6432 1450
Price $1.17 Target $1.29 ST Index 3,229.69 Historical Chart
1.00
1.05
1.10
1.15
1.20
1.25
01‐Feb
‐10
01‐M
ar‐10
29‐M
ar‐10
26‐Apr‐10
24‐M
ay‐10
21‐Jun
‐10
19‐Jul‐10
16‐Aug
‐10
13‐Sep
‐10
11‐Oct‐10
08‐Nov‐10
06‐Dec‐10
03‐Jan
‐11
0
2,000
4,000
6,000
8,00010,000
12,000
14,000
16,000
18,000
Vol ('000)Price ($)
Performance 1m 3m 6m
Absolute (%) ‐1.7 ‐1.7 1.8
Relative (%) ‐1.6 ‐3.1 ‐4.7 Stock Information
Ticker code SPOST.SI SPOST SP Market cap (US$m) 1,757.0 52‐week high (S$) 1.24 52‐week low (S$) 1.01 Shares issued (m) 1,921.4 6m avg d.vol (US$m) 5.6 Free float (%) 66.3 Major shareholders (%) Temasek (25.7), Capital Group (8.0)
Key Indicators
ROE (%) 54.9 Net gearing (%) 51.2 NTA (S$) 0.12 Interest cover (x) 15.6
Event SingPost did as well as can be expected. In other words, we expected
its mail business to reflect the current economic strength, and it did. But the logistics and retail businesses did not do so well profit‐wise due to lower margin components coming to the fore. If this is the best it can do despite the economy firing on all cyclinders, then it needs to move faster on its regionalisation and diversification plans. Perhaps the recent management restructuring will speed things along. Meanwhile, HOLD for the yield of 5+%.
Our View Net profit of $43.8m was flat YoY. Underlying net profit, excluding
one‐off items such as the $2.9m amortisation of deferred gain on IP rights and benefits from the Jobs Credit scheme which ended in June 2010, was lower at $40.9m, though still 5% higher from a year ago. The usual quarterly dividend of 1.25 cents was also declared.
Mail business did the best on stronger domestic, international and hybrid mail volume, with EBIT growth outpacing revenue growth. However, Logistics margins were affected by lower margin activities such as transhipment as opposed to higher margin customised logistics, while Retail profit fell on lower agency and retail activities.
Perhaps sensing investors’ impatience with its long‐promised regionalisation and diversification, SingPost recently appointed two CEOs. An ex‐McKinsey consultant will now accelerate its expansion in the region and diversify into non‐postal businesses. Incumbent CEO Ng Hin Lee will lead postal services and strategic acquisitions.
Action & Recommendation We maintain our HOLD recommendation, mainly for the yield of 5%. Our target price has been raised to $1.29 as we roll over to FY12, still on 15x target PE. Year End Mar 31 2009 2010 2011F 2012F 2013FSales (S$'m) 481.1 525.5 567.0 579.5 592.3Net profit (S$'m) 148.8 165.0 161.3 166.2 170.5Underlying net profit (S$'m) 147.3 147.7 161.3 166.2 170.5EPS (S cts) 7.7 8.1 8.4 8.6 8.8EPS growth (%) ‐0.5 5.0 3.1 3.1 2.6PER (x) 15.4 14.7 14.2 13.8 13.5EV/EBITDA (x) 11.9 10.4 10.2 9.8 9.3Yield (%) 5.3 5.3 5.3 5.3 5.3
Singapore Post 31 January 2011
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Figure 1: Quarterly Results
3 mths ended (S$ m) Dec 10 Dec 09 % yoy Sep‐10 % qoq
Revenue 148.5 139.6 6.3% 137.6 7.9%
EBITDA 64.2 62.2 3.2% 59.0 8.8%
Net profit 43.8 44.1 ‐0.7% 39.5 11.0%
EPS (cts) 2.3 2.3 ‐0.4% 2.1 11.1%
Underlying net profit 40.9 38.9 5.0% 36.6 11.8%
Underlying EPS (cts) 2.1 2.0 5.3% 1.9 12.0%
DPS (cts) 1.3 1.3 0.0% 1.3 0.0%
EBITDA margin (%) 43.2% 44.5% ‐1.3% 42.8% 0.4%
Net margin (%) 29.5% 31.6% ‐2.1% 28.7% 0.8%
Source: Company
Singapore Post 31 January 2011
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Profit and loss YE Mar 31 (S$'m) 2009 2010 2011F 2012F 2013FSales 481.1 525.5 567.0 579.5 592.3Cost of goods sold 0.0 0.0 0.0 0.0 0.0Gross profit 481.1 525.5 567.0 579.5 592.3Other income 33.8 53.1 59.6 57.9 59.2Operating expenses ‐335.9 ‐376.8 ‐415.3 ‐419.7 ‐428.4Operating profit 178.9 201.7 211.4 217.6 223.1Net interest income (exp) ‐7.7 ‐7.9 ‐14.8 ‐14.8 ‐14.8Share of associates 7.8 1.0 ‐0.5 ‐0.5 ‐0.5Net exceptional 0.0 0.0 0.0 0.0 1.0Pretax income 179.1 194.8 196.1 202.3 208.8Income taxes ‐29.6 ‐29.0 ‐34.1 ‐35.4 ‐36.5Minority interest 0.7 0.8 0.7 0.7 1.7Net income 148.8 165.0 161.3 166.2 170.5EPS (cts) 7.7 8.1 8.4 8.6 8.8EBITDA 205.3 230.7 239.4 245.6 251.1
Source: Company data, Kim Eng estimates
Balance sheet YE Mar 31 (S$'m) 2009 2010 2011F 2012F 2013FTotal assets 770.2 1,074.9 1,099.1 1,137.2 891.4Current assets 299.5 485.1 498.4 547.0 311.4Cash 139.5 390.2 338.8 385.4 146.7ST investments 0.0 0.0 0.0 0.0 0.0Trade & other receivables 69.3 87.3 93.6 95.6 97.7Inventory 0.7 0.8 1.0 1.0 2.0Others 90.0 6.8 65.0 65.0 65.0Other assets 470.7 589.8 600.8 590.2 579.9LT investments 9.0 43.0 43.0 43.0 43.0Net fixed assets 457.3 450.3 440.3 429.7 419.4Others 4.0 6.9 27.5 27.5 27.5Intangible 0.3 89.6 90.0 90.0 90.0Total liabilities 514.0 776.3 752.9 745.2 449.3Current liabilities 194.4 241.1 223.2 227.2 231.3Trade & other payables 194.4 229.4 211.4 215.4 219.5ST debt 0.0 0.0 0.0 0.0 0.0Others 0.1 11.7 11.7 11.7 11.7Long‐term liabilities 319.5 535.2 529.7 518.0 218.0LT debt 303.0 503.0 503.0 503.0 203.0Others 16.6 32.2 26.7 15.0 15.0Total equity 256.2 298.5 346.3 392.0 442.1Paid‐in capital 114.7 115.2 120.0 120.0 120.0Reserve 131.0 175.6 216.3 262.0 312.1Others 5.7 2.1 5.0 5.0 5.0Minority interest 4.8 5.6 5.0 5.0 5.0
Source: Company data, Kim Eng estimates
Cash flow YE Mar 31 (S$'m) 2009 2010 2011F 2012F 2013FOperating cash flow 170.4 208.6 116.7 206.4 212.8Pretax income 179.1 194.8 196.1 202.3 208.8Depreciation & amortisation 26.4 29.0 28.0 28.0 28.0Change in working capital ‐2.4 18.5 ‐82.6 1.9 1.0Others ‐32.7 ‐33.6 ‐24.8 ‐25.9 ‐24.9Investment cash flow ‐7.8 ‐29.6 ‐38.1 ‐17.4 ‐17.8Net capex ‐14.0 ‐12.2 ‐17.0 ‐17.4 ‐17.8Change in ST investment 0.0 0.0 0.0 0.0 0.0Change in LT investment 6.2 ‐17.4 ‐21.1 0.0 0.0Cash flow after invt. 162.6 179.0 78.6 189.0 195.1Financing cash flow ‐127.1 71.8 ‐130.1 ‐142.4 ‐433.8Change in share capital 1.5 0.5 4.8 0.0 0.0Net change in debt 0.0 200.0 0.0 0.0 ‐300.0Change in other LT liab. ‐128.6 ‐128.7 ‐134.9 ‐142.4 ‐133.8Net cash flow 35.4 250.7 ‐51.5 46.6 ‐238.7
Source: Company data, Kim Eng estimates
Key ratios YE Mar 31 2009 2010 2011F 2012F 2013FGrowth (% YoY) Sales 1.8 9.2 7.9 2.2 2.2OP 1.9 12.7 4.8 3.0 2.5EBITDA ‐0.7 12.3 3.8 2.6 2.2NP ‐0.3 10.9 ‐2.3 3.1 2.6EPS ‐0.5 5.0 3.1 3.1 2.6Profitability (%) Gross margin NA NA NA NA NAOperating margin 37.2 38.4 37.3 37.6 37.7EBITDA margin 42.7 43.9 42.2 42.4 42.4Net profit margin 30.9 31.4 28.4 28.7 28.8ROA 19.6 17.9 14.8 14.9 16.8ROE 62.9 60.6 50.9 45.6 41.4Stability Gross debt (cash)/equity (%) 118.3 168.5 145.2 128.3 45.9Net debt (cash)/equity (%) 63.8 37.8 47.4 30.0 12.7Int. coverage (X) 23.2 25.5 14.3 14.7 15.1Int. & ST debt coverage (X) 23.2 25.5 14.3 14.7 15.1Cash flow int. coverage (X) 22.1 26.4 7.9 13.9 14.4Cash flow int. & ST debt (X) 22.1 26.4 7.9 13.9 14.4Current ratio (X) 1.5 2.0 2.2 2.4 1.3Quick ratio (X) 1.5 2.0 2.2 2.4 1.3Net debt (cash) ($'m) 163.4 112.8 164.2 117.6 56.3Per share data (cts) EPS 7.7 8.1 8.4 8.6 8.8CFPS 8.8 10.8 6.1 10.7 11.0BVPS 13.0 15.2 17.7 20.1 22.7SPS 25.0 27.3 29.4 30.1 30.7EBITDA/share 10.7 12.0 12.4 12.7 13.0DPS 6.3 6.3 6.3 6.3 6.3
Source: Company data, Kim Eng estimates
ANALYSTS’ COVERAGE / RESEARCH OFFICES
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PHILIPPINES Ricardo PUIG Head of Research +63 2 849 8835 [email protected] Strategy Property Telcos Laura DY‐LIACCO +63 2 849 8840 [email protected] Utilities Conglomerates Lovell SARREAL +63 2 849 8841 [email protected] Consumer Media Cement Kenneth NERECINA +63 2 849 8839 [email protected] Conglomerates Ports/ Logistics Katherine TAN +63 2 849 8843 [email protected] Banks Construction REGIONAL Luz LORENZO Economist +63 2 849 8836 [email protected] Economics ONG Seng Yeow +65 6432 1832 [email protected] Regional Products & Planning TAIWAN Gary Chia Head of Greater China Research +886 2 3518 7900 [email protected] Boris Markovich COO, Greater China Research +852 3969 9518 [email protected] John Brebeck, CFA Head of Taiwan Strategy Head of Research, Taiwan +886 2 3518 7906 [email protected] George Chang, CFA Head of Upstream Tech +886 2 3518 7907 [email protected] Vincent Chen Head of Downstream Tech +886 2 3518 7903 [email protected] Dennis Chan – NB Supply Chain +886 2 3518 7913 [email protected] Andrew C Chen – IC Backend +886 2 3518 7940 [email protected] Ellen Chiu – Taiwan Consumer +886 2 3518 7936 [email protected] Danny Ho – Taiwan Petrochemical +886 2 3518 7923 [email protected] Min Li – Alternative Energy +852 3969 9521 [email protected] May Lin – Taiwan Telecom +886 2 3518 7942 [email protected] Tess Wang – Taiwan Financials +886 2 3518 7901 [email protected]
Recommendation definitions
SINGAPORE Stephanie WONG Head of Research Regional Head of Institutional Research +65 6432 1451 [email protected] Strategy Small & Mid Caps Gregory YAP +65 6432 1450 [email protected] Conglomerates Technology & Manufacturing Transport & Telcos Rohan SUPPIAH +65 6432 1455 [email protected] Airlines Marine & Offshore Wilson LIEW +65 6432 1454 [email protected] Hotel & Resort Property & Construction Anni KUM +65 6432 1470 [email protected] Conglomerates REITs James KOH +65 6432 1431 [email protected] Finance & Banking Logistics Resources Eric ONG +65 6432 1857 [email protected] Marine & Offshore Energy OOI Yi Tung +65 6433 5712 [email protected] Property & Construction YEAK Chee Keong, CFA +65 6433 5730 [email protected] Retail & Consumer Engineering Infrastructure HONG KONG / CHINA Edward FUNG Head of Research +852 2268 0632 [email protected] Power Construction Ivan CHEUNG +852 2268 0634 [email protected] Property Industrial Ivan LI +852 2268 0641 [email protected] Banking & Finance Jacqueline KO +852 2268 0633 [email protected] Consumer Staples Robert WANG +852 2268 0630 [email protected] Auto Andy POON +852 2268 0645 [email protected] Telecom & related services Samantha KWONG +852 2268 0640 [email protected] Consumer Discretionaries Alex YEUNG +852 2268 0636 [email protected] Industrial INDIA Jigar SHAH Head of Research +91 22 6623 2601 [email protected] Oil & Gas Transportation Anubhav GUPTA +91 22 6623 2605 [email protected] Property Capital goods Rohit LEDWANI +91226623 2625 [email protected] Banking and Financial services Nikhil AGARWAL +91226623 2611 [email protected] Cement Metals Haripreet BATRA +91226623 2606 [email protected] Software Education Ganesh RAM +91226623 2607 [email protected] Telecom Media
MALAYSIA YEW Chee Yoon Head of Research +603 2141 1555 [email protected] Strategy Banks Telcos Property Conglomerates & others LIEW Mee Kien +603 2141 1555 [email protected] Gaming Media Power Construction Research Team +603 2141 1555 Food & Beverage Manufacturing Plantations Tobacco Technology INDONESIA Katarina SETIAWAN Head of Research +6221 2557 1125 [email protected] Consumer Infra Shipping Strategy Telcos Others Ricardo SILAEN +6221 2557 1126 [email protected] Auto Energy Heavy Equipment Property Resources Rahmi MARINA +6221 2557 1128 [email protected] Banking Lucky ARIESANDI, CFA +6221 2557 1127 [email protected] Cement Construction Pharmaceutical Retail Adi N. WICAKSONO +6221 2557 1130 [email protected] Generalist Arwani PRANADJAYA +6221 2557 1129 [email protected] Technical analyst VIETNAM Nguyen Thi Ngan Tuyen +84 838 38 66 36 x 163 [email protected] Pharmaceutical Confectionary and Beverage Oil and Gas Ngo Bich Van +84 838 38 66 36 x 164 [email protected] Bank Insurance Nguyen Quang Duy +84 838 38 66 36 x 162 [email protected] Shipping Seafood Rubber Trinh Thi Ngoc Diep +84 838 38 66 36 x 166 [email protected] Property Construction THAILAND Kanchan KHANIJOU + 662 658 6300 x 4750 [email protected] Banks Construction Materials Nathavut SHIVARUCHIWONG + 662 658 6300 x 4730 [email protected] Property Shipping
Our recommendation is based on the following expected price performance within 12 months:
+15% and above: BUY‐15% to +15%: HOLD‐15% or worse: SELL
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Singapore Post 31 January 2011
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