• Results in line
• Underlying net profit lower
• Alibaba long-stop date extended

Results in line

Singapore Post (SingPost) reported a 27.7% YoY rise in revenue to S$317.6m and a 196.4% increase in net profit to S$105.4m in 4QFY16, boosted by one-off gains from the partial disposal of an associated company (GD Express Carrier Bhd) and sale of available-for-sale investments totaling S$78.8m. Underlying net profit, however, dropped 20.1% to S$31.8m in 4QFY16.

As FY16 underlying net profit of S$153.6m was just 4% higher than our full year estimate, we judge this set of results as within expectations. Excluding the impact of loss of income from the SPC mall redevelopment and deconsolidation of DataPost and Novation Solutions, underlying net profit would have been stable.

Good topline figures; core operating profit fell 1.1%

In FY16, annual revenue totaled S$1.15b (+25.2%), surpassing the S$1b mark for the first time. This was driven by eCommerce related growth and acquisitions. Indeed, logistics revenue rose 34.7% to S$626.0m, while retail & eCommerce revenue increased 74.6% to S$160.7m, largely due to the US acquisitions (TradeGlobal and Jagged Peak). Mail revenue was flat at S$500.0m.

In terms of operating profit, however, performance was more subdued. Excluding one-off items, operating profit fell 1.1% to S$188.9m in FY16, mainly due to loss of rental revenues from SPC as well as increased corporate overheads. Retail & eCommerce operating profit also fell from S$9.7m in FY15 to S$2.5m in FY16.

Updates on the board and Alibaba

Meanwhile, the group’s corporate governance issues have resulted in the departure of two board members, and whilst Mr. Simon Israel (SingTel’s Chairman) will be SingPost’s new Chairman, a replacement has yet to be found for the CEO position. As for Alibaba’s second tranche of investment, the long-stop date has been extended to 31 Oct 2016.

Continues to deliver your dividend

In line with the group’s usual practice, SingPost has declared a final dividend of S$0.025/share, bringing full year dividends to S$0.07/share (4.4% dividend yield). Along with a calm that has descended upon the market (albeit a lowvolume one), we use a lower cost of equity of 6.5% (terminal growth rate remains at 2%), and our fair value estimate rises from S$1.37 to S$1.56. Maintain HOLD.

Source: OCBC Research - 11 May 2016