Singapore Post - CGS-CIMB Research 2022-11-03: A Tale Of Two Halves In 1HFY23

Singapore Post - A Tale Of Two Halves In 1HFY23

  • Despite strong revenue growth in 1HFY23 (Apr to Sep 2022) to S$959m (+31% y-o-y), SingPost (SGX:S08) reported a net loss of S$10m. Excluding exceptional items, SingPost's core EBIT fell 19% y-o-y to S$42m in 1HFY23, while core net profit fell 65% y-o-y to S$13m, making up 21%/25% of our/Bloomberg consensus’ FY23F. We deem the results as broadly in line, as we expect a better 2HFY23F.
  • SingPost saw a significant turnaround in 2QFY23 as group operating profit rebounded strongly and tripled q-o-q to S$30.7m post-1Q weakness.
    • Post and parcel segment returned to the black in 2QFY23 —
      • international post and parcel (IPP) business “stabilised” post-initial shocks from China’s strict lockdown measures in 1QFY23 and saw further easing of conveyance costs.
      • domestic e-commerce volumes also recovered q-o-q in 2QFY23. Excluding impact of major customer (which insourced part of its logistics since 1QFY23), e-commerce volume grew 14% y-o-y in 1HFY23, with wallet share gains from existing customers and new client additions.
    • Meanwhile, logistics segment grew from strength to strength, with continued efforts by SingPost to scale its Australian business (42% of 1HFY23 revenue) and is now SingPost’s largest revenue and profit contributor.
  • Easing freight rates is both a boon and a bane.
    • Lower air freight can help reduce conveyance costs (still double pre-COVID levels as of Sep 2022), aiding margin recovery for IPP business and allowing SingPost to reposition itself to capture growth of the structurally growing cross-border e-commerce business.
    • Meanwhile, lower ocean freight could impact SingPost’s freight forwarding business, which had been one of the bright spots over the past 2.5 years.
  • With IPP revenues some 70% larger vs freight forwarding business pre-pandemic, we believe the trend is ultimately a net positive for SingPost. We upgrade our call to HOLD from Reduce, as we think the worst could be over for SingPost, though the pace of recovery from current levels remains uncertain given various macro headwinds.
  • We finetune our FY23-25F EPS, while our target price of S$0.55 for SingPost remains unchanged, pegged to 15.8x CY23F P/E (1 standard deviation below 5-year historical average).

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 | 2022-11-03
SGX Stock Analyst Report HOLD UPGRADE REDUCE 0.550 SAME 0.550

Previous report by CGS-CIMB:
2022-08-19 Singapore Post - Pushing Back Recovery Expectations

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