Date of Report: 3 October 2024
Broker: UOB Kay Hian
Improved Earnings Outlook
Singapore Post (SPOST) is experiencing an improved earnings outlook for its postal segment. The company has returned to profitability in FY2024, driven by adjustments made in the postal service during the second half of FY2024 and the acquisition of new domestic e-commerce customers. The delivery business in Singapore recorded a profit in the first quarter of FY2025, with year-on-year growth in e-commerce volumes.
Contribution from Border Express Acquisition
The full consolidation of Border Express is expected to significantly boost Singapore Post’s segmental annual operating profit by S$35 million to S$40 million in FY2025. For the first quarter of FY2025, Border Express reported strong performance, with revenue increasing by 5.3% year-on-year and operating profit growing by 24.4% year-on-year. This growth is attributed to successful customer wins and effective cost management.
Valuation and Investment Recommendation
UOB Kay Hian maintains a “BUY” recommendation for Singapore Post, with a target price of S$0.61. This valuation reflects the market’s underestimation of the logistics segment, given that Singapore Post’s current market capitalization is around S$990 million. The property and postal segments are valued at S$844 million and S$245 million, respectively.
Key Catalysts for Growth
Key events that could drive Singapore Post’s share price higher include:
- Continued recovery in earnings from the postal segment.
- Successful divestment of non-core businesses to streamline operations.
- Earnings-accretive acquisitions that expand market reach and operational efficiency.
