Since our last report on Singapore Post (SingPost) on 6 May 2013, its share price rose about 8.5% to reach S$1.40 in mid May, but fell by an even greater amount (~10%) subsequently to its current price, which is a level that is supported by fundamentals. With increasing labour-related expenses and administrative expenses, operating costs of the group have been steadily increasing. Along with the changing profile of mail, the group is diversifying its businesses. Even during the midst of its transformation, SingPost is a good stock to hold in the current volatile environment. However, we see limited upside potential unless earnings growth from its acquisitions proves to be better than expected. Maintain HOLD with S$1.23 fair value estimate.
Rise and fall of share price post results
Since our last report on Singapore Post (SingPost) on 6 May 2013, its share price rose about 8.5% to reach S$1.40 in mid May, but fell by an even greater amount (~10%) subsequently to its current price of S$1.25. As mentioned in our earlier report, we expect the stock to be supported by investors seeking yield, given the nature of SingPost’s businesses and consistency of its dividends. However, the strength of its rally (boosted by heightened interest in dividend-yielding instruments such as REITs) took us by surprise, and the subsequent profit-taking by investors has brought the share price down to a range that is supported by fundamentals.
In the midst of transformation
With increasing labour-related expenses and administrative expenses, operating costs of the group have been steadily increasing. The changing profile of mail (domestic mail expected to trend lower though number of households in Singapore trends higher) has also meant a rapid growth of packages and decline in letters, leading to more investment requirements by management in its infrastructure. The group is in the midst of transformation to diversify its businesses, having embarked on quite a number, albeit relatively small, acquisitions so far. More recently, the group announced that it has completed its acquisition of 30% interest in Dash Logistics Company.
Maintain HOLD
SingPost is a good stock to hold in the current volatile environment, as its consistent dividends are backed by stable operating cash flows. We look forward to the group’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. Still, we expect the share price to be supported by investors seeking yield (~5% FY13F). Maintain HOLD with S$1.23 fair value estimate.
Since our last report on Singapore Post (SingPost) on 6 May 2013, its share price rose about 8.5% to reach S$1.40 in mid May, but fell by an even greater amount (~10%) subsequently to its current price of S$1.25. As mentioned in our earlier report, we expect the stock to be supported by investors seeking yield, given the nature of SingPost’s businesses and consistency of its dividends. However, the strength of its rally (boosted by heightened interest in dividend-yielding instruments such as REITs) took us by surprise, and the subsequent profit-taking by investors has brought the share price down to a range that is supported by fundamentals.
In the midst of transformation
With increasing labour-related expenses and administrative expenses, operating costs of the group have been steadily increasing. The changing profile of mail (domestic mail expected to trend lower though number of households in Singapore trends higher) has also meant a rapid growth of packages and decline in letters, leading to more investment requirements by management in its infrastructure. The group is in the midst of transformation to diversify its businesses, having embarked on quite a number, albeit relatively small, acquisitions so far. More recently, the group announced that it has completed its acquisition of 30% interest in Dash Logistics Company.
Maintain HOLD
SingPost is a good stock to hold in the current volatile environment, as its consistent dividends are backed by stable operating cash flows. We look forward to the group’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. Still, we expect the share price to be supported by investors seeking yield (~5% FY13F). Maintain HOLD with S$1.23 fair value estimate.
No comments:
Post a Comment