Singapore Post (SPOST SP)
Current Share Price: SGD$0.95
Target Price: SGD$1.025
Potential yield: +7.8%
We maintain a HOLD action on the counter. Insights written below.
Singapore Post Limited is the national #postal
service provider in #Singapore.
The Company provides domestic and international postal and #courier
services including end-to-end integrated mail solutions covering data printing, letter-shopping, delivery and #mailroom
management, and others. Singapore Post also offers end-to-end e-commerce #logistics
We begin by noticing its negative operating margin just slightly; with results helped by lower tax expense and share of loss from #associates.
Operating margin was 9.4% (-1.1ppt year over year), dragged by lower contribution from #domestic
postal. On top of that, it was also helped by an absence of equity accounting for 4PX and disposed stake in Indo Trans Logistics. Income tax expense was also lower due to a tax provision for a foreign subsidiary in 1QFY19.
As for core net profit margins, S$25.6m was reached in 1QFY20, in line with our forecasts. Singapore Post (SPOST) reported 1QFY20 core net profit of S$25.6m, rising up 3.9% year over year. Revenue was flat at S$376.4m. Interim dividend remains unchanged year over year at 0.5 S cents.
Postal & Logistics:
Segment operating profit was SGD$37.6m, down 8.9% year over year, as demand and growth from eCommerce-related deliveries was insufficient to offset the decline from letter mails and costs rising from service enhancements. The pace of decline is similar to that in 4QFY18 (-8.3% yoy) as the group looks set to continue its service enhancement initiatives.
Revenue for logistics was marginally lower at S$119.5m (-2.2% yoy), driven by the exit of certain customer contracts at Quantium Solutions (QS) while Couriers Please (CP) was impacted by the depreciation of the AUD(Australian dollar). This was offset by better freight forwarding revenue at Famous Holdings (FH) on higher volumes. Overall, the operating loss for the segment increased by S$0.9m year over year.
As for the news of its US eCommerce, losses have been reduced as its sale is still in the process.