Previous day closing price: $1.10
Recommendation – Under review
Target price – Under review (previously $1.27)
SingPost’s net profit for 1QFY Mar12 was slightly below our expectation at $37.4m as growing labour costs (+12.2% YoY) and administrative expenses (+8.5% YoY) eroded profitability. Otherwise, revenue for the first quarter came well within expectations (+3% YoY to $142.3m) as the steady mail business continued to boost topline growth. A dividend of 1.25 cent per share was declared.
The logistics business that SingPost is actively building up is still showing lackustre results, given that the share of losses from associates widened from $0.1m to $0.3m. We understand that the loss was attributable to Postea Inc, which was acquired in 2009. Contributions from acquisitions made early this year (GD Express Carrier and DataPost) have not kicked in. Since our last update in May, the group has spent another $29m on acquisitions in the international logistics space (Indo Trans Logistics and Shenzhen 4PX Express). These new investments are said to be profitable and should progressively contribute to the bottomline from the next quarter.
To-date, however, SingPost’s past investments have not delivered any tangible results and we do not expect contributions from the new investments to have any earthshaking impact on the bottomline in the near term. Nonetheless, the stock is supported by a steady dividend yield of 5.7% (based on fixed DPS of 6.25 cents). Pending a change in analyst coverage, we are putting our recommendation and target price under review.
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