Singapore Post - Growing via acquisitions‏

• In-line results

• Continued growth via acquisitions

• Solid financial position

1QFY16 results in line
Singapore Post (SingPost) reported a 20.7% YoY increase in revenue to S$254.6m and a 15.8% rise in net profit to S$46.6m in 1QFY16. Stripping out one-off items, underlying net profit rose 8.0% to S$40.3m in the quarter, accounting for 25.6% of our full year estimate, in line with expectations. Revenue rose with continued growth in ecommerce and logistics contributions and the inclusion of new subsidiaries; excluding the impact of M&As as well as the divestment of subsidiaries, revenue remained constant. Underlying operating profit margin decreased from 22.5% in 1QFY15 to 20.2% in 1QFY16.

Continued growth in logistics
In the Mail segment, revenue rose 1.6% YoY to S$125.1m as the postage revision in Oct 2014 helped to offset the impact of declining traditional letter mail volumes; operating profit was higher at S$47.3m as the division was boosted by a one-off gain from the divestment of Novation Solutions and DataPost HK. As for Logistics, revenue increased 43.6% to S$140.1m while operating profit was higher at S$6.7m with contributions from new subsidiaries, which was offset by integration and transformation costs.

Technical Analysis
Daily Chart
Strong net cash position of S$329m
Net cash from operating activities was healthy at S$59.2m in the quarter, but due to capital expenditure of S$75.6m (comprises mainly the construction of eCommerce Logistics Hub and addition of POPStations), the group saw a net cash outflow in 1QFY16. There was also the purchase of S$23.3m of financial assets. As at end 1QFY16, SingPost was in a net cash position of S$329.0m, placing the group in a good position to grow via acquisitions in the near term. Meanwhile the group has declared an interim dividend of 1.5 S cents, an increase compared to the 1.25 S cents in the same period last year. Maintain BUY with S$2.19 fair value estimate on SingPost. (Read Report)

Source : OCBC Investment Research

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