• 14.9% rise in underlying net profit
• Change in accounting policy
• To continue investing

FY15 results in line; FY14 re-stated

Singapore Post (SingPost) reported a 28.7% YoY rise in revenue to S$248.7m and a 51.6% drop in net profit to S$38.5m in 4QFY15, as 4QFY14 was re-stated to include $44.5m of fair value gains on investment properties. Stripping out one-off items, underlying net profit actually increased 14.9% YoY to S$41.1m in 4QFY15. Net profit in FY15 was S$157.6m (underlying net profit similar at S$157.2m), 2.3% higher than our full year forecast.

Revenue grew 12.0% in FY15 to S$919.6m due to growth in SingPost’s eCommerce and logistics businesses as well as contributions from new acquisitions. Excluding the impact of M&A, revenue only rose 1.1%. The mail business remained challenging, as public mail volumes declined 1.7% in the year, while international mail is growing increasingly competitive.

Switching to fair value model from cost model

In FY15, the group’s accounting policy with respect to the measurement of investment properties, subsequent to initial recognition, was changed from the cost model to the fair value model. This was applied retrospectively, hence FY14 numbers were re-stated. With the intention to redevelop the retail mall of the Singapore Post Centre, management has determined that the fair value model will provide more relevant information of the group’s investment properties.

Expecting more investments

In FY15, the group invested S$224.2m in acquisitions to expand its regional network, its new Regional eCommerce Logistics Hub, additional POPStations to strengthen its parcels business, and new mail sorting equipment to improve the service quality of its Singapore mail operations.

As of Mar 2015, SingPost had S$584.1m of cash and cash equivalents, along with financial assets of S$34.6m (~63% current, rest non-current). After accounting for its debt, the group is in a net cash position of S$380m. Looking ahead, it is likely that the group will continue to direct its cash pile to earningsaccretive acquisitions, along with investments in infrastructure.

Meanwhile, the group has declared a final dividend of 2.5 S cents/share, bringing full year dividends to 6.25 S cents/share (~3.3% yield). Maintain BUY with S$2.19 fair value estimate.

Source: OCBC Research - 13 May 2015