Singapore Post - CGS-CIMB Research 2022-08-19: Pushing Back Recovery Expectations

Singapore Post - Pushing Back Recovery Expectations

  • While the profit guidance in Jul 22 had already signalled a tough operating environment for SingPost (SGX:S08)’s Post and Parcel business (which entered into an operating loss position during the quarter), SingPost's overall EBIT of S$10.6m (-47% y-o-y) in 1QFY23 (1 Apr 2022 to 30 Jun 2022) still came in below expectations at 9% of both our and Bloomberg consensus’ FY23F expectations.
    • Logistics strength led SingPost’s revenue to rise 35% y-o-y in 1Q, driven by both organic growth as well as consolidation of Freight Management Holdings (FMH). SingPost plans to further expand its reach in the Australian market and extract operational synergies across entities; we forecast segment operating profit to rise 28.5% y-o-y to S$57m (58% of group) in FY23F.
    • International Post and Parcel (IPP) volumes fell 33% y-o-y in 1Q. We believe that IPP volumes should recover in the upcoming quarters. However, the pace of recovery could be gradual in the near-term given continued strict COVID-related controls in China and weaker cross-border volumes year-to-date due to changes in the European Union’s VAT rules.
    • Domestic Post and Parcel (DPP) likely to remain challenged. While strong growth in domestic e-commerce volumes have been able to successfully offset traditional letter mail declines in FY22F, we believe that this trend is difficult to repeat in FY23F (1QFY23: -26% y-o-y). Given the high fixed operating leverage nature of DPP, our FY22-24F EPS is lowered by 16.4- 24.5% on the back of weaker volume assumptions.
  • Downgrade SingPost from Add to REDUCE with a lower target price of S$0.55. We think SingPost’s net profit could remain dragged in the near-term until International Post and Parcel (IPP) shows stronger signs of recovery. Our target price of S$0.55 is based on 15.8x FY23F P/E (1 standard deviation below 5-year historical average), lowered from 18.8x due to near term headwinds.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

ONG Khang Chuen CFA CGS-CIMB Research | 2022-08-19
SGX Stock Analyst Report REDUCE DOWNGRADE ADD 0.55 DOWN 0.800

Previous report by CGS-CIMB:
2022-07-15 Singapore Post - Pushing Back Recovery Expectations

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