• Earlier signs of potential turnaround dissipated with Singapore Post (SPOST)’s dismal 1QFY19 results; core PATMI of S$24.7m came in 6% below our/consensus expectations.
• Deviance was due to larger-than-expected associates’ losses, higher taxes and wider e-commerce losses. Higher rental income offered partial buffer to earnings decline.
• Decelerating international mail growth, low logistics profitability and continuous ecommerce investments are areas we will monitor ahead.
• We turn more cautious on SPOST’s operating environment and downgrade the stock from Add to HOLD, with a lower target price of S$1.27 and 3% dividend yield.

1Q19 Results Miss, Dragged by Exceptionals and Poor E-commerce

Singapore Post (SPOST)’s 1QFY19 headline PATMI of S$18.7m (-40% y-o-y) was a miss due to larger- than-expected associate losses (mainly 4PX as it invested further in warehousing and infrastructure), S$6m fair value (FV) loss in warrants of associated company and higher taxes. Excluding exceptional items, 1Q19 core PATMI accounted for 20%/19% of our/consensus full-year forecasts.

1Q19 interim DPS of 0.5 Scts was unchanged y-o-y; free cash flow doubled from 1Q18’s S$32m to S$62m on the back of lower capex.

Source: CGS-CIMB Research - 06 Aug 2018