SINGAPORE (Feb 5): Singapore Post (SingPost) on Friday announced 3Q17/18 earnings increased 37.2% to $43.0 million, compared to $31.4 million a year ago.
Revenue for the quarter came in at $412.8 million, 11.7% more than $369.4 million recorded in the previous year, fuelled by growth across all the group’s segments.
Income tax expenses also decreased by 65.3% to $2.94 million from $8.49 million in the previous year, due to a one-off adjustment of deferred tax of $6.9 million arising from changes in the US corporate tax rate.
The group has also declared an interim dividend of 0.5 cent per ordinary share.
See: Singapore Post posts 37% rise in 3Q earnings to $43 mil on better performance, one-off tax adjustment
Following this announcement, UOB Kay Hian is maintaining its “buy” call on SingPost with a target price of $1.62.
The worst could be over for the group’s e-commerce segment as it saw a significant improvement, narrowing its operating losses by 55.4% to $3.8 million as TradeGlobal performed largely in line with the turnaround plan and delivered good cost control over the peak season in 3Q17/18.
Meanwhile, Jagged Peak recorded a 43.9% increase in revenue as volume surged over the US festive peak shopping season.
In a Monday report, analyst Thai Wei Ying says, “While SingPost is still in the transformation phase, we are encouraged by the turnaround in key segments for two consecutive quarters. Going forward, we expect earnings to be driven by higher volumes in international mail, recovery in TradeGlobal and contribution from SPC retail mall.”
Similarly, CIMB is reiterating its “add” recommendation on SingPost with a target price of $1.58.
The group’s international mail continued to see higher cross-border deliveries, driving a 15.8% growth in postal revenue and 4.0% increase in operating profit.
In a Saturday report, analyst Ngoh Yi Sin says, “While the recent terminal due changes could pose near-term overhang on the postal segment, we believe this could be mitigated by the launch of new international airmail rates; and stronger collaboration with Alibaba, in the form of growing ecommerce revenue pie, greater involvement across the entire value chain, and more transshipment routes.”
The analyst also believe that the group is poised for earnings growth in all three of its segments, and is set to also receive rental income from its newly-opened retail mall.
Maybank Kim Eng is also keeping its “buy” rating on SingPost with a target price of $1.50.
The group’s results came in line with Maybank’s expectations, supported by growth in the group’s postal segment, continued turnaround in the e-commerce segment and resumption of rental income from its redeveloped mall.
In a Monday report, analyst John Cheong says, “We expect the growth and turnaround trends to continue from three key drivers: cost efficiency gains; winning new customers; and increasing collaboration with existing clients.”
The analyst also believes that potential improvement in the group’s logistics segment could also drive a recovery, but this is not expected in the next two to three quarters.
As at 10.45am, shares in SingPost are trading at $1.39 or 26 times FY18 earnings with a dividend yield of 2.5%.
Despite a surge in SingPost’s share price on Friday, Bloomberg reported that Alibaba Group’s stake in the group is still worth less than what it originally invested.
In May 2014, Alibaba acquired a 14% stake in SingPost for $500 million in a bid to develop its logistics presence in Southeast Asia, but a decline in demand for snail mail, heavy investments in logistics and losses at a US unit has pushed SingPost shares down about 28% in the last three years, bringing Alibaba to a loss of $47.8 million.
