Singapore Post (SingPost) reported a 14.5% YoY rise in revenue to S$171.0m but saw a 5.1% fall in net profit to S$39.5m in 3QFY13. Excluding one-off items, underlying net profit rose 2.5% to S$39.8m in the quarter, in line with our expectations. The group saw strong revenue performance in international mail, logistics and retail; notwithstanding the fact that 3QFY13 was the festive season, it is still encouraging to see the 11.2% QoQ growth (vs average of 7.0% in 3QFY12, 3QFY11 and 3QFY10). As a stock, SingPost has rewarded shareholders with handsome returns while providing stability and ease of mind. As it is now trading close to our fair value estimate of S$1.23, we downgrade it to HOLD due to limited upside potential, unless earnings growth from its acquisitions proves to be better than expected.
3QFY13 results in line
Singapore Post (SingPost) reported a 14.5% YoY rise in revenue to S$171.0m but saw a 5.1% fall in net profit to S$39.5m in 3QFY13. Excluding one-off items, underlying net profit rose 2.5% to S$39.8m in the quarter. Results were in line with our expectations, such that 9M13 net profit accounted for 76.7% of our full year estimate.
Strong revenue performance
In the mail division, domestic mail volume continued to decline, registering the fifth quarter of lower mail volumes. However, strong growth in international e-commerce packets and contributions from Novation Solutions helped to boost mail revenue by 20.5% YoY. Excluding Novation Solutions, growth was still good at 15.1%. Logistics and retail also saw growth of 10.9% and 19.8%, respectively. Notwithstanding the fact that 3QFY13 was the festive season which generally brings in greater revenue, it is encouraging to see the 11.2% QoQ growth (vs +6.0% in 3QFY12, +7.9% in 3QFY11 and 7.2% in 3QFY10).
Focus on growth and cost pressures
We expect the focus going forward will still remain on cost management to contain inflationary pressures and rising labour related expenses, while pursuing growth initiatives. The group has been increasingly active in the M&A space, having spent a total of S$97m in its acquisition of General Storage Pte Ltd (which runs the Lock+Store self-storage business) and a 62.5% stake in a sea freight consolidator and freight-forwarder in the last two months.
Stock has done well; downgrading to HOLD
SingPost has done well after we upgraded it to BUY in early Jan last year. As a stock, SingPost has rewarded shareholders with handsome returns while providing stability and ease of mind. As it is now trading close to our fair value estimate of S$1.23, we downgrade it to HOLD. We look forward to SingPost’s transformation as it seeks more growth opportunities, but till then, we see limited upside potential unless earnings growth from its acquisitions proves to be better than expected.
Singapore Post (SingPost) reported a 14.5% YoY rise in revenue to S$171.0m but saw a 5.1% fall in net profit to S$39.5m in 3QFY13. Excluding one-off items, underlying net profit rose 2.5% to S$39.8m in the quarter. Results were in line with our expectations, such that 9M13 net profit accounted for 76.7% of our full year estimate.
Strong revenue performance
In the mail division, domestic mail volume continued to decline, registering the fifth quarter of lower mail volumes. However, strong growth in international e-commerce packets and contributions from Novation Solutions helped to boost mail revenue by 20.5% YoY. Excluding Novation Solutions, growth was still good at 15.1%. Logistics and retail also saw growth of 10.9% and 19.8%, respectively. Notwithstanding the fact that 3QFY13 was the festive season which generally brings in greater revenue, it is encouraging to see the 11.2% QoQ growth (vs +6.0% in 3QFY12, +7.9% in 3QFY11 and 7.2% in 3QFY10).
Focus on growth and cost pressures
We expect the focus going forward will still remain on cost management to contain inflationary pressures and rising labour related expenses, while pursuing growth initiatives. The group has been increasingly active in the M&A space, having spent a total of S$97m in its acquisition of General Storage Pte Ltd (which runs the Lock+Store self-storage business) and a 62.5% stake in a sea freight consolidator and freight-forwarder in the last two months.
Stock has done well; downgrading to HOLD
SingPost has done well after we upgraded it to BUY in early Jan last year. As a stock, SingPost has rewarded shareholders with handsome returns while providing stability and ease of mind. As it is now trading close to our fair value estimate of S$1.23, we downgrade it to HOLD. We look forward to SingPost’s transformation as it seeks more growth opportunities, but till then, we see limited upside potential unless earnings growth from its acquisitions proves to be better than expected.
No comments:
Post a Comment