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2010 Apr 09 - OCBC Report - Singapore Post

2010 Apr 09 - OCBC Report - Singapore Post

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Published by: Kyith on Apr 11, 2010
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Please refer to the important disclosures at the back of this document.Historical analysis.
Charting Singapore Post's (SingPost)share price against the STI reveals that the ratio is currentlybelow its historical average ever since SingPost's IPO in 2003(Exhibit 1). If one were to hold the view that most of the easymoney has been made in the high beta stocks during thestock market rebound since Mar 09, it is then likely that thisratio may stay stable or even rise (i.e. limited downside). Wealso did a peer comparison and found that SingPost hasgenerally outperformed some of its peers in terms of returnsover a five-year period, excluding dividends (Exhibit 2). As thegroup proceeds with its regional expansion plans and seeksto diversify its businesses, the stock should continue toperform well, assuming no major hiccups.
Nature of business both a boon and bane.
SingPost'sresilient earnings and stable operating cash flows mean thatit can weather downturns with ease, and lack of financingshould not be a problem with regards to its expansion plans.Besides a cash pile of S$149m as at Dec 09, the group alsorecently issued S$200m worth of notes that seems well pricedamidst a 3x oversubscription rate (refer to earlier report 24Mar 2010). The onus is on management to avoid over-payingfor acquisitions and to make good investment decisions,especially since there is a need to seek new business driversto sustain growth as the domestic postal industry has limitedgrowth prospects.
Industry updates.
The stock price of Pos Malaysia [NOTRATED] surged to a 32-month high yesterday after newswiresreported that Nationwide Express Courier Service Bhd maybe interested in bidding for a stake in the postal company.Pos Malaysia also said it will double the price of postagestamps for standard mail weighing up to 20g to 60 sen starting1 Jul 2010. Developments should be monitored for insightsregarding the value of Pos Malaysia.
Maintain BUY.
The future of SingPost over the long term hingesheavily on its ability to make astute investment decisions asit seeks new business opportunities. Meanwhile, we also likethe group's enthusiasm in pursuing new initiatives in the areasof innovation, social responsibility and its attempts to stayrelevant in today's fast changing world. With a total upsidepotential of about 15% (including dividend of 5.9%), wemaintain our
rating with a fair value estimate of S$1.16.
Singapore Post Ltd
Company Update
MITA No. 010/06/20099 April 2010
Previous Rating: BUY
Current Price: S$1.06Fair Value: S$1.16
Company Update MITA No. 010/06/2009
Reuters CodeSPOS.SIISIN CodeS08Bloomberg CodeSPOST SPIssued Capital (m)1,927Mkt Cap (S$m/US$m)2,042 / 1,465Major ShareholdersSing Tel 25.7%Free Float (%) 74.2%Daily Vol 3-mth (‘000) 3,44652 Wk Range 0,755 - 1.100
Low Pei Han
(65) 6531 9813e-mail: LowPH@ocbc-research.com
Growth rate depends on investment decisions
    J   a   n  -    0    8    A   p   r  -    0    8    J   u    l  -    0    8    O   c    t  -    0    8    J   a   n  -    0    9    A   p   r  -    0    9    J   u    l  -    0    9    O   c    t  -    0    9    J   a   n  -    1    0
(S$ m)FY08FY09FY10FFY11FRevenue472.6481.1518.3526.9EBITDA198.2205.0207.7217.7P/NTA (x) (cts) (x)13.613.712.912.4
Page 29 April 2010Singapore Post Ltd
   M  a  y   0   3   N  o  v   0   3   M  a  y   0   4   N  o  v   0   4   M  a  y   0   5   N  o  v   0   5   M  a  y   0   6   N  o  v   0   6   M  a  y   0   7   N  o  v   0   7   M  a  y   0   8   N  o  v   0   8   M  a  y   0   9   N  o  v   0   9
   R  a   t   i  o   (  x   )
 S i  n g o s t   pi   c e (   S  $  )  
SingPost/STISingPostAverage: 0.0004
Exhibit 1: Historical SingPost/STI ratio
Source: Bloomberg, OIR 
   A  p  r   0   5   A  u  g   0   5   D  e  c   0   5   A  p  r   0   6   A  u  g   0   6   D  e  c   0   6   A  p  r   0   7   A  u  g   0   7   D  e  c   0   7   A  p  r   0   8   A  u  g   0   8   D  e  c   0   8   A  p  r   0   9   A  u  g   0   9   D  e  c   0   9   A  p  r   1   0
   %  r  e   t  u  r  n
SingPostPos MalaysiaDeutsche PostUPS
Exhibit 2: SingPost and comparables
Source: Bloomberg, OIR 
Page 39 April 2010Singapore Post Ltd
SingPost's Key Financial DataEARNINGS FORECASTBALANCE SHEET Year Ended 31 Mar (S$m)FY08FY09FY10FFY11FAs at 31 Mar (S$m)FY08FY09FY10FFY11F
Revenue472.6481.1518.3526.9Cash and cash equivalents104.1139.5203.2252.0Operating expenses-298.3-309.5-345.0-345.6Other current assets77.875.791.390.8EBITDA198.2205.0207.7217.7Property, plant, and equipment470.8457.3449.1437.9EBIT171.9178.6182.4193.1Total assets747.4770.2841.0878.2Net interest expense-8.1-7.2-7.4-7.1Debt302.1303.0303.0303.0 Associates8. liabilities excluding debt201.9194.4211.5214.5Pre-tax profit175.5179.1184.0192.0Total liabilities521.8514.0548.5540.9Tax-25.8-29.6-25.8-26.9Shareholders equity221.4251.4287.1331.4Minority interests-0.5-0.7-0.5-0.5Total equity225.6256.2292.5337.2Net profit att to shareholders149.3148.8157.8164.7Total equity and liabilities747.4770.2841.0878.2
CASH FLOW Year Ended 31 Mar (S$m)FY08FY09FY10FFY11F
Op profit before working cap. chang200.5205.5215.8222.7EPS (S cents) cap, taxes and int-26.8-35.2-5.3-32.2NTA per share (cents)11.613.010.512.8Net cash from operations173.7170.3210.5190.5EBITDA margin (%)41.942.640.141.3Purchase of PP&E-12.8-14.5-13.4-14.1Net profit margin (%)31.630.930.431.3Other investing flows18.16.6-6.31.7PER (x)13.613.712.912.4Investing cash flow5.3-7.8-19.7-12.4Price/NTA (x) cash flow-143.8-127.1-127.2-129.2EV/EBITDA (x)11.310.810.39.6Net cash flow35.235.463.648.9Dividend yield (%) at beginning of year69.0104.1139.5203.2ROE (%)67.459.255.049.7Cash at end of year (incl ODs)104.1139.5203.2252.0Net gearing (%)
Source: Company data, OIR estimates

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