Singapore Post

UOBKayhian on 30 June 2014

FY14F PE (x): 27.1
FY15F PE (x): 24.4

Championing a low-cost e-commerce model. Singapore Post’s (SingPost) fullyintegrated
end-to-end e-commerce solutions provide an avenue for local and global
brands to grow their online businesses easily and quickly. Through SP eCommerce,
the group offers B2B4C solutions that include website development and content
management, logistics solutions and support services. Management believes this
helps customers avoid major capital outlays in technology and delivery infrastructure,
and alleviates the difficulty of navigating local customs requirements and transactionrelated
risks. Regional ramp-up would also be more efficient, given SingPost’s existing
network.
No change to our earnings model. We expect faster growth in e-commerce-related
activities to offset near-term dilution. We project a 3-year net profit CAGR of 9%. We
see more upside from a JV with Alibaba and M&As.
Downgrade to HOLD with target price at S$1.73, based on a 3-stage DCF model.
SingPost is now trading at an implied FY16F PE of 24.4x, between the sector
averages for traditional postal and logistics operators (22.7x) and e-commerce-related
players (29.1x). We think the re-rating is justified and view the stock as fairly valued. At
this juncture, we wait for more clarity on the proposed collaboration with Alibaba. Entry
price is S$1.50.