• Driven by logistics
• More overseas, eCommerce revenue
• Still delivering dividends

2QFY16 results within expectations

Singapore Post (SingPost) reported a 19.4% YoY rise in revenue to S$263.2m and a 38.5% increase in net profit to S$53.4m in 2QFY16, such that 1HFY16 revenue and net profit accounted for 50% and 54% of our full year estimates, respectively. Excluding the impact of acquisitions and divestment of subsidiaries, revenue remained stable. Stripping out one-off items, underlying net profit fell 4.8% YoY to S$37.5m in the quarter as the group continued to invest in eCommerce infrastructure and capabilities to accelerate customer acquisitions in the global eCommerce market.

Driven by logistics revenue

Mail revenue in the quarter dropped 5.6% YoY to S$116.5m, negatively impacted by the divestment of DataPost in 2QFY16 but offset by the postage revision in Oct 2014. Unsurprisingly, “Logistics” was the star performer with a 43.3% YoY rise in revenue to S$156.1m in 2QFY16 due to growing contributions from eCommerce logistics activities and the inclusion of new subsidiaries. Finally, in the “Retail and eCommerce” segment, revenue increased 7.1% YoY to S$23.9m.

Higher dependence on overseas and eCommerce

As SingPost continues to invest in its transformation initiatives, overseas revenue now accounts for a higher percentage of total revenue (39.5% in 1HFY16 vs 30.0% in 1HFY15). Ecommerce related turnover has also increased from 26.9% (S$116m) in 1HFY15 to 29.0% (S$150m) in 1HFY16. Looking ahead, the group sees accelerated growth in the years ahead due to present and past initiatives.

Consistent dividends amidst transformation

Meanwhile, with regards to Alibaba’s second tranche of investment in SingPost (announced 8 Jul 2015 for a 5% stake), the long-stop date has been extended from 30 Nov 2015 to 29 Feb 2016, as both parties are in the process of fulfilling certain conditions in the agreement. Finally, in line with its usual practice, the group has declared an interim quarterly dividend of 1.5 S cents, higher than 1.25 S cents in the same period last year. Maintain BUY with S$2.19 fair value estimate.

Source: OCBC Research - 3 Nov 2015