Singapore Post - Pushing Back Recovery Expectations
- Based on its preliminary assessment of accounts, Singapore Post (SingPost, SGX:S08) expects its Post and Parcel segment to report an operating loss in 1QFY23 (Apr 2022 to Jun 2022) due to challenging operating conditions. On the other hand, SingPost notes that its Logistics segment continued to perform well, while the Property segment remained stable. See SingPost's announcement on profit guidance.
- SingPost’s International Post and Parcel (IPP) business saw continued headwinds despite incremental air capacity improvement through Changi in recent months.
- Meanwhile, the Domestic Post and Parcel (DPP) segment continued to face structural impact, with traditional letter mail volumes further declining in 1QFY23F. While strong growth in e-commerce volumes have been able to successfully offset traditional letter mail declines over the past few quarters, we believe this trend is difficult to repeat in FY23F.
- While we have anticipated near-term challenges which could hinder Post and Parcel business recovery (e.g. China lockdowns, early recovery of flight volumes mainly concentrated on narrow body aircraft to tourist destinations), we were negatively surprised by operating losses for the Post and Parcel segment in 1Q. We believe this implies weakness in Domestic Post and Parcel (DPP) volumes given the high fixed cost nature of the business.
- Thus, we lower our volume and margin assumptions for DPP, and cut our FY23-25F earnings per share (EPS) forecast for SingPost by 6.0%-11.3%. With the EPS cuts, our target price is lowered to S$0.80, still based on 18.8x CY23F P/E (0.5 standard deviation below historical average).
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-07-15 2022-07-15
Read also CGS-CIMB's most recent report:
2022-11-03 Singapore Post - A Tale Of Two Halves In 1HFY23
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