SINGAPORE (Jan 10): OCBC Investment Research is keeping its “hold” call on Singapore Post (SingPost) with an unchanged fair value estimate of $1.26.

This comes as the research house believes more time is needed for the national postal carrier to execute on the targets it had set out in its strategic review.

“We look forward to positive results from the execution of the group’s targets from its recent strategic review, which should drive earnings and ultimately the stock price,” says OCBC analyst Low Pei Han in a note on Wednesday.

OCBC is forecasting flattish underlying earnings for SingPost in FY18F, with growth expected in FY19F.

The group saw its earnings fall 9.5% to $28.5 million in the 2Q ended September, down from $31.4 million a year ago.

This was due to the absence of a one-off gain a year ago from the dilution of interest in an associated company. Excluding such exceptional items, underlying net profit rose 1.9% to $27.6 million.

Revenue grew 10.2% to $354.7 million, from $321.7 million a year ago, led by growth in the postal and logistics segments.

<hr/><a href="https://www.theedgesingapore.com/singposts-2q-earnings-fall-95-285-mil-absence-one-gain" target="_blank">See: SingPost's 2Q earnings fall 9.5% to $28.5 mil on absence of one-off gain</a><hr/>

“Looking ahead, we expect a gradual ramp-up in utilization rates of the [logistics] hub, but the environment for logistics as a whole is likely to remain challenging,” Low says. However, the analyst notes that margins for this segment are generally low due to intense pricing competition.

“For the higher margin mail business, international mail is growing but we note that this has relatively lower margins than the domestic mail segment which continues to see a decline in volumes,” Low adds.

<hr/><a href="https://www.theedgesingapore.com/singpost-invest-16-mil-island-wide-smart-post-office-network" target="_blank">See: SingPost to invest $16 mil in island-wide Smart Post Office network</a><hr/>

As at 3.34pm, shares of SingPost are trading flat at $1.23.

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