More than just a mailman

Transcription

Logistics│Singapore
March 25, 2014
COMPANY NOTE
Singapore Post Ltd
SPOST SP / SPOS.SI
Market Cap
Avg Daily Turnover
Free Float
Current
S$1.33
Target
S$1.55
US$2,001m
US$1.96m
74.0%
Prev. Target
S$2,546m
S$2.47m
1,892 m shares
Up/Downside
N/A
16.3%
Conviction|
|
Notes from the Field
In response to declining mail volumes and an increasingly tough
operating environment, SingPost is undergoing a major transformation
to become a leading e-commerce logistics player in Asia.
————————————————————————————————————————
Jessalynn CHEN
T (65) 6210 8672
E jessalynn.chen@cimb.com
Kenneth NG, CFA
T (65) 6210 8610
E kenneth.ng@cimb.com
Company Visit
Channel Check
Expert Opinion
Customer Views
————————————————————————————————————————
‘‘
B2C e-commerce sales
in Asia can grow at a 28%
CAGR from 2012-2017, faster
than the global pace of 17%.
By 2017, Asia is expected to
account for 45% of total global
B2C e-commerce sales (2012:
29%).
– eMarketer, leading e-commerce research firm
With its low-cost distribution network
and active acquisitions in the region,
we believe that SingPost is ready to
meet demand for low-cost end-to-end
e-commerce logistics solutions in Asia.
We initiate coverage with an Add
rating and DCF-based target price of
S$1.55 (WACC 7.3%). Catalysts are
expected from e-commerce logistics
growth.
The mailman finds a new job
SingPost has all the last-mile assets to
deliver mail anywhere in Singapore.
Mail delivery is a sunset industry but
SingPost’s assets are still good for
delivering a variety of goods in the
world of e-commerce. The business
only requires tweaks to 1) refine its
infrastructure to deliver parcels, in
addition to mail; 2) add last-mile
delivery capabilities in Asia; and 3)
add end-to-end e-commerce logistics
solutions – all of which SingPost is
doing via investments or M&A.
Filling the gap in e-commerce
logistics
SingPost’s competitive advantage
over its postal peers and other 3PL
(third-party logistics) players is its
ability to provide a full spectrum of
e-commerce logistics solutions at low
Price Close
121.0
1.400
116.0
1.350
111.0
1.300
106.0
1.250
101.0
1.200
20
96.0
15
Vol m
10
5
Jun-13
Sep-13
Dec-13
Source: Bloomberg
52-week share price range
1.33
1.40
1.24
1.55
Current
Target
SOURCE: CIMB, COMPANY REPORTS
Paid to wait
SingPost used to be one of
Singapore’s
high
yield
stocks
although it was operating in a sunset
industry. With its new push into
e-fulfilment, it will have a unique
blend of growth and yield. The old
business will still fund its dividends,
while its net cash of S$135m will
allow
for
earnings-accretive
acquisitions that can aid its strategic
repositioning. Our estimates have not
factored in complementary assets and
acquired earnings from its S$135m
net cash pile. In the meantime,
investors are receiving an attractive
dividend yield of 4.7% while waiting
for SingPost to turn into a swan.
Financial Summary
Relative to FSSTI (RHS)
1.450
Mar-13
costs. This is made possible by its
access to: 1) postal-to-postal rates
(governed by the Universal Postal
Union); 2) bilateral agreements with
other countries; and 3) partnerships
with low-cost couriers. It also
constantly enhances its capabilities
with acquisitions. As no other postal
player in Asia has moved into ecommerce (due to government
mandates) and 3PL providers do not
have access to such low delivery costs,
SingPost has a clear advantage in
costs and service offerings.
Revenue (S$m)
Operating EBITDA (S$m)
Net Profit (S$m)
Normalised EPS (S$)
Normalised EPS Growth
FD Normalised P/E (x)
DPS (S$)
Dividend Yield
EV/EBITDA (x)
P/FCFE (x)
Net Gearing
P/BV (x)
ROE
% Change In Normalised EPS Estimates
Normalised EPS/consensus EPS (x)
Mar-12A
578.5
216.5
142.0
0.075
(10.3%)
18.00
0.063
4.70%
10.32
25.75
(28.3%)
3.81
28.8%
Mar-13A
658.8
214.8
136.5
0.072
(4.0%)
19.68
0.063
4.70%
10.77
16.92
(16.2%)
3.77
20.6%
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
CIMB Securities Limited has had an investment banking relationship with Kerry Logistics Network within the preceding 12 months.
Mar-14F
844.5
219.5
144.4
0.076
5.8%
19.54
0.063
4.70%
10.49
18.32
(18.0%)
3.72
21.5%
1.00
Mar-15F
882.9
229.2
151.5
0.080
4.9%
18.63
0.063
4.70%
10.13
22.87
(15.0%)
3.64
22.2%
1.03
Mar-16F
927.2
244.9
161.6
0.085
6.7%
17.46
0.063
4.70%
9.37
16.75
(18.3%)
3.52
23.0%
1.10
Designed by Eight, Powered by EFA
Singapore Post Ltd
March 25, 2014
PEER COMPARISON
Research Coverage
Bloomberg Code
CWT SP
KPTT SP
636 HK
SPOST SP
CWT Limited
Keppel T&T
Kerry Logistics Network
Singapore Post Ltd
Market
SG
SG
HK
SG
Recommendation
ADD
HOLD
ADD
ADD
Rolling P/BV (x)
Mkt Cap US$m
654
744
2,453
2,001
Price
1.39
1.71
11.26
1.33
Target Price
1.57
1.94
15.50
1.55
Upside
13.7%
13.9%
37.7%
16.3%
Rolling FD P/E (x)
8.00
35.0
7.00
30.0
6.00
25.0
5.00
20.0
4.00
15.0
3.00
10.0
2.00
5.0
1.00
0.00
Jan-10
Jan-11
Jan-12
Jan-13
0.0
Jan-10
Jan-14
Jan-12
Jan-13
Jan-14
Keppel T&T
CWT Limited
Keppel T&T
Singapore Post Ltd
Singapore Post Ltd
Peer Aggregate: P/BV vs ROE
Peer Aggregate: FD P/E vs FD EPS Growth
1.60
50.0%
1.40
43.8%
1.20
37.5%
1.00
31.3%
0.80
25.0%
0.60
18.8%
0.40
12.5%
0.20
6.3%
0.00
Jan-10
Jan-11
CWT Limited
0.0%
Jan-11
Jan-12
Rolling P/BV (x) (lhs)
Jan-13
Jan-14
12.0
150%
10.0
108%
8.0
67%
6.0
25%
4.0
-17%
2.0
-58%
0.0
Jan-10
Jan-15
ROE (See Footnote) (rhs)
-100%
Jan-11
Jan-12
Jan-13
FD P/E (x) (See Footnote) (lhs)
Jan-14
Jan-15
FD EPS Growth (See Footnote) (rhs)
Valuation
CWT Limited
Keppel T&T
Singapore Post Ltd
FD P/E (x) (See Footnote)
Dec-13
Dec-14
8.79
8.51
14.99
13.22
16.63
17.77
19.58
18.85
Dec-15
8.01
11.31
17.43
17.77
Dec-13
1.26
2.01
1.10
3.74
P/BV (x)
Dec-14
1.12
1.83
1.34
3.66
Dec-15
1.01
1.65
1.25
3.55
Dec-13
16.56
18.55
8.86
10.56
EV/EBITDA (x)
Dec-14
14.20
15.31
10.94
10.21
Dec-15
13.60
12.26
9.64
9.57
Dec-15
13.3%
15.4%
7.4%
22.8%
Dividend Yield
Dec-13
Dec-14
2.53%
2.17%
2.34%
2.66%
1.24%
1.00%
4.70%
4.70%
Dec-15
2.17%
3.11%
1.15%
4.69%
Growth and Returns
CWT Limited
Keppel T&T
Singapore Post Ltd
FD EPS Growth
Dec-13
17.8%
13.7%
8.1%
-2.0%
(See Footnote)
Dec-14
Dec-15
3.2%
6.3%
13.4%
16.8%
-6.4%
2.0%
3.9%
6.0%
ROE (See Footnote)
Dec-13
Dec-14
15.3%
14.0%
14.1%
14.5%
8.1%
6.9%
21.3%
22.0%
Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends.
NPAT/EPS values for calculations and valuations are based on recurring and normalised values for GAAP and IFRS accounting standard companies respectively.
2
Singapore Post Ltd
March 25, 2014
BY THE NUMBERS
Share price info
Share px perf. (%)
Relative
Absolute
1M
3M
12M
0
1.8
12.3
0
1.1
Major shareholders
Singapore Telecommunications Ltd
7.3
% held
25.9
Deutsche Bank AG
3.0
Aberdeen
2.9
P/BV vs ROE
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Rolling P/BV (x) (lhs)
70.0%
61.3%
52.5%
43.8%
35.0%
26.3%
17.5%
8.8%
0.0%
FD Normalised P/E vs FD Normalised EPS
Growth
25.0
15.0%
20.0
9.0%
15.0
3.0%
10.0
-3.0%
5.0
-9.0%
0.0
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
-15.0%
Rolling FD Normalised P/E (x) (lhs)
ROE (See Footnote) (rhs)
Diluted Normalised EPS Growth (rhs)
Profit & Loss
We expect much stronger
yoy revenue growth of 28.2%
in FY14, fuelled by full-year
contributions from Famous
Holdings, which was
acquired in 4QFY13.
(S$m)
Total Net Revenues
Gross Profit
Operating EBITDA
Depreciation And Amortisation
Operating EBIT
Total Financial Income/(Expense)
Total Pretax Income/(Loss) from Assoc.
Total Non-Operating Income/(Expense)
Profit Before Tax (pre-EI)
Exceptional Items
Pre-tax Profit
Taxation
Exceptional Income - post-tax
Profit After Tax
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Preference Dividends (Australia)
Net Profit
Normalised Net Profit
Fully Diluted Normalised Profit
Mar-12A
632.3
632.3
216.5
(30.2)
186.3
(13.3)
0.7
0.0
173.7
Mar-13A
711.4
711.4
214.8
(36.3)
178.5
(13.9)
2.4
0.0
167.0
Mar-14F
887.5
887.5
219.5
(34.6)
184.9
(7.7)
3.3
0.0
180.4
Mar-15F
935.5
935.5
229.2
(37.7)
191.5
(7.7)
3.5
0.0
187.3
Mar-16F
981.1
981.1
244.9
(41.2)
203.6
(7.7)
3.8
0.0
199.7
173.7
(31.6)
167.0
(30.4)
180.4
(34.3)
187.3
(34.1)
199.7
(36.3)
142.0
(0.1)
136.5
(0.1)
146.1
(1.7)
153.2
(1.7)
163.3
(1.7)
142.0
142.0
142.0
136.5
136.5
136.5
144.4
146.1
144.4
151.5
153.2
151.5
161.6
163.3
161.6
Mar-14F
219.5
Mar-15F
229.2
Mar-16F
244.9
Cash Flow
SingPost plans to spend
S$100m from FY14 to FY16
on mail infrastructure, new
POP (Pick Own Parcel)
Stations and the
improvement of its efficiency
and service quality.
(S$m)
EBITDA
Cash Flow from Invt. & Assoc.
Change In Working Capital
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow
Net Interest (Paid)/Received
Tax Paid
Cashflow From Operations
Capex
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow
Cash Flow From Investing
Debt Raised/(repaid)
Proceeds From Issue Of Shares
Shares Repurchased
Dividends Paid
Preferred Dividends
Other Financing Cashflow
Cash Flow From Financing
Total Cash Generated
Free Cashflow To Equity
Free Cashflow To Firm
Mar-12A
216.5
Mar-13A
214.8
3.5
23.9
(0.8)
(2.0)
1.7
3.4
15.8
5.1
5.9
5.9
(13.3)
(33.5)
176.6
(26.1)
(13.9)
(29.8)
210.8
(12.7)
(7.7)
(34.3)
181.8
(30.4)
(7.7)
(34.1)
191.3
(69.7)
(7.7)
(36.3)
208.4
(41.7)
0.0
(51.3)
(77.4)
(92.4)
53.1
(52.0)
0.0
2.6
(27.8)
0.0
1.8
(67.9)
0.0
1.8
(39.9)
346.9
(36.4)
(119.1)
3.0
0.0
(118.1)
0.0
0.0
(118.1)
0.0
0.0
(118.2)
0.0
0.0
(118.2)
(12.1)
179.4
278.6
99.2
112.5
(24.9)
(140.1)
18.8
158.8
172.7
(324.0)
(442.1)
(288.0)
154.1
161.8
(22.6)
(140.8)
(17.4)
123.4
131.1
(22.6)
(140.8)
27.7
168.5
176.2
3
Singapore Post Ltd
March 25, 2014
BY THE NUMBERS
Balance Sheet
(S$m)
Total Cash And Equivalents
Total Debtors
Inventories
Total Other Current Assets
Total Current Assets
Fixed Assets
Total Investments
Intangible Assets
Total Other Non-Current Assets
Total Non-current Assets
Short-term Debt
Current Portion of Long-Term Debt
Total Creditors
Other Current Liabilities
Total Current Liabilities
Total Long-term Debt
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities
Total Non-current Liabilities
Total Provisions
Total Liabilities
Shareholders' Equity
Minority Interests
Total Equity
Mar-12A
692.2
95.5
2.0
9.7
799.3
238.0
90.7
87.7
214.6
630.9
0.0
Mar-13A
644.9
130.1
4.2
11.7
790.8
235.9
94.3
193.7
247.6
771.5
316.4
Mar-14F
356.8
166.6
5.4
11.7
540.5
231.7
94.3
193.7
247.6
767.3
15.0
Mar-15F
339.4
181.4
6.6
11.7
539.1
263.7
94.3
193.7
247.6
799.4
15.0
Mar-16F
367.1
195.6
6.9
11.7
581.3
264.2
94.3
193.7
247.6
799.8
15.0
211.5
34.4
245.9
505.7
271.5
32.2
620.1
220.1
308.5
32.2
355.7
220.1
322.5
32.2
369.7
220.1
338.7
32.2
385.9
220.1
0.0
505.7
18.8
770.4
659.8
(0.0)
659.8
32.5
252.6
22.0
894.7
667.5
0.1
667.6
32.5
252.6
22.0
630.3
675.7
1.8
677.5
32.5
252.6
22.0
644.4
690.5
3.5
694.1
32.5
252.6
22.0
660.6
715.3
5.3
720.5
Mar-12A
2.2%
(8.12%)
37.4%
0.099
0.35
14.05
18.2%
83.9%
56.91
N/A
N/A
45.9%
18.3%
Mar-13A
13.9%
(0.78%)
32.6%
0.057
0.35
12.80
18.2%
86.5%
62.48
N/A
N/A
44.5%
14.8%
Mar-14F
28.2%
2.18%
26.0%
0.064
0.36
23.99
19.0%
81.8%
64.11
N/A
N/A
35.6%
17.1%
Mar-15F
4.5%
4.42%
26.0%
0.055
0.37
24.86
18.2%
78.0%
71.94
N/A
N/A
37.1%
20.3%
Mar-16F
5.0%
6.84%
26.4%
0.070
0.38
26.43
18.2%
73.2%
74.41
N/A
N/A
37.0%
21.1%
Mar-12A
N/A
0.0%
-
Mar-13A
N/A
0.0%
92.4
Mar-14F
N/A
0.0%
-
Mar-15F
N/A
0.0%
-
Mar-16F
N/A
0.0%
-
Key Ratios
SingPost’s net cash offers
room for acquisitions, which
should spur its next stage of
growth in e-commerce
logistics.
Revenue Growth
Operating EBITDA Growth
Operating EBITDA Margin
Net Cash Per Share (S$)
BVPS (S$)
Gross Interest Cover
Effective Tax Rate
Net Dividend Payout Ratio
Accounts Receivables Days
Inventory Days
Accounts Payables Days
ROIC (%)
ROCE (%)
Key Drivers
(S$)
Volumes Moved (% Change)
Rates Charged (% Change)
Acquisitions (m)
4
Singapore Post Ltd
March 25, 2014
Table of Contents
1. COMPANY BACKGROUND
p.5
2. THE POSTAL INDUSTRY
p.9
3. E-COMMERCE INDUSTRY & TRENDS
p.11
4. OPPORTUNITIES FOR SINGPOST
p.15
5. RISKS
p.18
6. FINANCIALS
p.20
7. VALUATION AND RECOMMENDATION
p.24
8. APPENDIX
p.26
1. COMPANY BACKGROUND
1.1 Overview of SingPost
SingPost is Singapore’s national postal service provider with operations in 12
countries and access to a global postal network in more than 220 countries.
Given a challenging environment for the postal industry (letter volumes have
been declining by 1-4% p.a.), SingPost has diversified its business and evolved
into an integrated provider of mail, logistics and retail solutions. In particular,
it is aggressively building up its capabilities in e-commerce logistics, with the
goal of becoming the choice partner for eTailers looking to expand in Asia
Pacific. It aims to do this both via acquisitions and organic growth.
SingPost has three operating segments: 1) mail; 2) logistics; and 3) retail &
e-commerce. These have been its three operating pillars since its listing on the
SGX in May 03.
Figure 1: SingPost's three business segments
Mail
Segment
SingPost's core business.
Delivery of letters and parcels
islandw ide.
Quantium Solutions provider in Asia Pacific. Vehicle
International mail
Handles incoming and outgoing
international mail and packages.
Famous Holdings
DataPost
Provider of business printing
and mailing solutions w ith the
shortest speed to market.
Domestic mail
Key
businesses
Logistics
Logistics and fulfiment services
vPOST
Warehousing and shipping
services for online purchases.
Freight forw arder w ith
w orldw ide netow rk. Acquired
62.5% stake in Feb 2013.
Clout Shoppe
Online luxury goods retailer.
Acquired in Feb 2011.
Speedpost
Offers courier and parcel
services.
SP e-Commerce
Provider of front-end ecommerce solutions.
Lock + Store
Provider of private storage
space for businesses and
individuals. Acquired in Jan 2013.
Financial Services planning, personal loans,
Captures regional transhipment
flow s through Singapore.
Others
for e-commerce logistics grow th.
Provider of business process
Novation Solutions outsourcing services. Acquired
in May 2012.
Philatelic
Sale of stamps.
Retail & e-Commerce
Transhipments
Offers remittance, financial
insurance and credit cards.
Offers bill payment, ticketing,
government application and
agency services.
% of revenue
62.9%
30.1%
7.0%
% of OP
81.0%
6.1%
6.3%
OP margin
34.1%
5.4%
23.8%
*OP denotes operating profit
SOURCES: CIMB, COMPANY REPORTS
1.2 Ongoing transformation
Under the leadership of CEO Dr. Wolfgang Baier, SingPost is undergoing
accelerated transformation to become a leading e-commerce logistics provider
in the region, at the same time protecting its core competency in mail. We
believe that this transformation will position SingPost for its next stage of
growth and lead to an earnings turnaround.
End-to-end e-commerce logistics offerings. SingPost has made various
acquisitions in the logistics and e-commerce space, enabling it to provide a full
suite of end-to-end e-commerce logistics solutions across the region. While
most of its customers only engage the company for a small part of the supply
chain, it is starting to acquire new customers willing to outsource their entire
e-commerce logistics supply chain to it. Currently, SingPost runs the entire
e-commerce business for Adidas in Singapore, Malaysia and the Philippines,
spanning website management, warehousing, inventory management,
5
Singapore Post Ltd
March 25, 2014
fulfilment, delivery & returns and customer care. It recently acquired three
more customers – Canon, Toshiba and Philips – for a full suite of e-commerce
solutions. SingPost plans to focus on ASEAN expansion initially, followed by
the Asia Pacific. As it gains traction, we believe its low-cost end-to-end
e-commerce logistics solutions will allow it to gain a larger share of the
fast-growing e-commerce market in Asia. We expect e-commerce logistics to
fuel SingPost’s next growth phase.
Figure 2: SingPost’s end-to-end e-commerce logistics offerings
SOURCE: CIMB RESEARCH, SP ECOMMERCE
Trusted communications. SingPost recognises that even as mail volumes
decline and it diversifies into new businesses, it has to remain relevant in the
mail segment and defend its core competency. As part of its transformation, it
plans to invest S$100m over three years starting FY14 to improve its mail
infrastructure, efficiency and service quality. It will dedicate S$60m to the
upgrading of postal infrastructure and S$30m to the refreshing of existing post
offices and opening of 100 POP (Pick Own Parcel) stations by end-2014. The
remainder will go to the SingPost Inclusivity Fund to help its low-income
workers. We believe the investment in new technology and infrastructure is
necessary to counter rising labour costs and competition in the postal industry,
while lending some buffer to margin pressure coming from the logistics
segment.
1.3 Segmental breakdown
Declining mail contributions to revenue. SingPost’s traditional mail
business previously accounted for 80% of its revenue. Following its attempts to
diversify its business streams, mail only accounted for 63% of revenue in FY13.
SingPost aims to bring this percentage down to 50% in the long run, which we
believe it is close to achieving as logistics and retail & e-commerce growth had
been stellar through 9MFY14.
But operating profit still dependent on mail. Despite declining mail
contributions, the bulk of SingPost’s operating profit still comes from the
higher-margin mail business. In FY13, mail contributed to 86.7% of its
operating profit and logistics and retail & e-commerce, only 6.5% and 6.7%
respectively. Mail operating margins are considerably higher at 34.1%, as
SingPost can leverage its local postal network and partnerships with other
overseas postal providers to deliver cost-effective solutions. Its logistics and
retail & e-commerce segments are more labour-intensive and have higher
volume-related costs such as freight, which results in lower operating margins
of 5.4% and 23.8% respectively.
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Singapore Post Ltd
March 25, 2014
Figure 3: Revenue by segment and % contribution from mail
S$m
1,000
Figure 4: Operating profit and operating margin by segment
S$m
100%
180
900
90%
160
800
80%
700
70%
600
60%
500
50%
400
40%
140
100
25%
80
20%
60
15%
40
10%
5%
200
20%
100
10%
20
0%
0
FY10
FY11
FY12
Mail
Retail & e-Commerce
FY13
FY14F
FY15F
35%
Please fill in the values above to have them entered in your rep
30%
30%
FY09
40%
120
300
0
45%
Title:
Source:
0%
FY09
FY16F
FY10
Mail
Retail & e-Commerce
Logistics OP margin
Logistics
% Mail
FY11
FY12
FY13
Logistics
Mail OP margin
Retail & e-Commerce OP margin
1.4 Growth through acquisitions
SingPost has been acquiring companies in all its business segments,
particularly logistics, to expand its geographical reach and complement its
existing capabilities. These newly-acquired companies have been responsible
for its revenue and earnings growth in recent years.
In particular, Quantium Solutions and Famous Holdings had increased revenue
contributions from its logistics segment from 14.9% in FY09 to 41.3% in
9MFY14. Excluding acquisitions, SingPost’s organic yoy growth would have
been only 7-10%, instead of the stellar 25-33% in recent quarters.
Figure 5: Recent acquisitions are mostly in the logistics segment, in line with SingPost’s plans to become a regional leader in
e-commerce logistics
Segment Company
Country
Stake Description
Mail
DataPost
Singapore
100% Electronic printing and despatching services
Mail
Novation Solutions
Hong Kong
100% Largest provider of security printing, document management and transaction mail in Hong Kong
Mail
Efficient E-Solutions
Malaysia
21%
Logistics Quantium Solutions
Singapore
100% Market leader in e-commerce logistics, with a presence in 10 countries across Asia Pacific
Logistics Famous Holdings
Singapore
63%
Freight forwarding
Logistics Dash Logistics
Vietnam
30%
Provision of domestic trucking and delivery services across 13 cities in Vietnam
Logistics General Storage
Singapore
100% Self storage solutions, renamed Lock+Store
Logistics GD Express
Malaysia
27%
Provision of express delivery and customized logistics services
Logistics Shenzhen 4PX
China
20%
Provision of integrated epress delivery services, international freight forwarding, import/export
Retail
Singapore
95%
Online sale of luxury products
Clout Shoppe
Largest provider of data print, record management, data and document processing in Malaysia
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Singapore Post Ltd
March 25, 2014
Figure 7: % revenue from the logistics segment has grown with
the acquisition of Quantium Solutions and Famous Holdings
Figure 6: YoY revenue growth with and without acquisitions
Retail
100%
3QFY14
Title:
Source:
90%
Logistics
80%
2QFY14
Please fill in the values above to have them entered in your rep
70%
60%
1QFY14
50%
40%
4QFY13
Mail
30%
20%
3QFY13
10%
0%
0.0%
5.0%
10.0%
15.0%
20.0%
YoY revenue growth ex-acquisitions
25.0%
30.0%
35.0%
FY09
YoY revenue growth
FY10
Domestic mail
Philatelic
Other logistics
*Note: 3QFY12/13 and 4QFY12/13 revenue grow th (ex-acquisitions) figures are estimated.
FY11
FY12
International mail
Quantium Solutions
Retail & e-Commerce
FY13
9MFY14
Hybrid mail
Famous Holdings
Financial Services
1.5 Geographical breakdown
As at end-FY13, SingPost derived 81% of its revenue from Singapore and the
rest from overseas. Overseas revenue has been on an uptrend, spurred by its
acquisitions to expand its logistics segment and to a lesser extent, hybrid mail.
After SingPost acquired Famous Holdings in 4QFY13, its overseas revenue
increased from 15% of the total to 30%. We expect the number to increase
further as SingPost expands its e-commerce logistics operations across the Asia
Pacific.
Figure 9: Proportion of revenue from overseas is rising rapidly
due to acquisitions
Figure 8: Geographical breakdown of FY13 revenue
S$ '000
80,000
70,000
19.1%
60,000
50,000
80.9%
Title:
Source:
40.0%
Acquired 62.5%
stake in Famous
Holdings (Logistics)
30.0% in your rep
Please fill
in the values above to have them entered
Acquired
Novation
Solutions
(Hybrid Mail)
25.0%
40,000
20.0%
30,000
15.0%
20,000
10.0%
10,000
5.0%
-
Local
Overseas
0.0%
Overseas revenue (LHS)
35.0%
% Overseas revenue (RHS)
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Singapore Post Ltd
March 25, 2014
2. THE POSTAL INDUSTRY
2.1 Postal landscape in Singapore
Regulatory body. Postal services in Singapore are governed by the Postal
Services Act, which is administered by the Infocomm Development Authority of
Singapore (IDA). The IDA is responsible for granting, modifying and
suspending postal licences, and for setting industry standards.
Mail segments and licensing. SingPost was granted a 25-year Public Postal
Licence on 1 Apr 92 and had a monopoly in basic mail services (conveyance of
letters of 500g or heavier) until 1 Apr 07, when the government liberalised the
market. The express letter services segment was liberalised in Apr 95, while the
delivery of parcels has always been open to competition and does not require a
licence.
Players. Apart from SingPost, there are three other players providing postal
services in Singapore: Asendia Singapore Pte Ltd (formerly known as Swiss
Post International Singapore Pte Ltd), WMG Pte Ltd and DHL Global Mail
(Singapore) Pte Ltd. These players joined the industry after the government
opened the market to competition in Apr 07. SingPost remains the largest
player and has to fulfil special duties as the public postal licensee.
Figure 10: Postal service providers in Singapore
Company
Date issued
Validity of license
Asendia Singapore Pte Ltd
Dec 1, 2007
10 years
WMG Pte Ltd
March 24, 2008
10 years
DHL Global Mail (Singapore) Pte Ltd
Feb 25, 2009
10 years
Singapore Post Ltd
April 1, 1992
25 years
Price regulation. Stamp prices are regulated by the IDA and fees were last
raised in 2006. This means that SingPost has limited pricing power in the basic
mail segment.
2.2 International governing body
The Universal Postal Union (UPU) is an agency of the United Nations and is the
primary body that sets the rules for international mail exchanges. It also
recommends initiatives to improve global mail volume growth and service
quality. The UPU currently has 192 member countries.
One important function of the UPU is to govern postal rates among member
countries (postal-to-postal rates). These postal-to-postal rates grant
national postal providers access to lower postal rates in other member
countries than the standard rack rates. The concessions given to member
countries differ according to their stage of economic development: developing
countries are given higher concessions and developed countries, lower
concessions for postal rates in other member countries. Singapore is currently
in the transition phase to become a developed country member.
2.3 Increasing need to counter declining mail volumes
Mail volumes have been declining across the globe, owing to the ongoing
digitisation of processes and migration to paperless statements. According to a
study by Accenture, mail volume for 19 postal organisations has been shrinking
at a CAGR of 5% since 2007.
Singapore’s mail volume (ordinary and registered mail) has been declining at a
CAGR of 0.5% since 2010. The decline would have been more drastic if parcel
volumes were not included. Due to growing e-commerce popularity, parcel
volumes (especially in the international segment) have been partially
countering the decline in letter volumes.
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Singapore Post Ltd
March 25, 2014
Figure 11: Domestic mail volume
Figure 12: International mail volume
m
m
680.0
120.0
675.0
118.0
Figure 13: Total mail volume
m
Title:
-0.3%
CAGR
Source:
Title:
Source:
790.0
785.0
-0.6% CAGR
-0.5% CAGR
670.0
Please fill in the values above
to have them entered in your
Please
report
fill in the values above to h
780.0
116.0
665.0
114.0
775.0
112.0
770.0
110.0
765.0
108.0
760.0
106.0
755.0
660.0
655.0
650.0
645.0
640.0
635.0
750.0
104.0
2010
2011
2012
2013
Domestic mail
2010
2011
2012
2013
International mail
SOURCES: CIMB, IDA
SOURCES: CIMB, IDA
2010
2011
2012
2013
Total
SOURCES: CIMB, IDA
Growing need to diversify. Given declining mail volumes, rising
competition and tough regulations which make it difficult to increase ASPs,
there is a pressing need for postal service providers to move up the value chain
or into other businesses. Areas that have attracted other postal organisations
are parcels (Austrian Post Group), digital services (Australia Post, Royal Mail),
payment solutions (Australia Post) and e-commerce (Poste Italiane).
SingPost is set to capture e-commerce growth. SingPost has chosen to
leverage its low-cost delivery network to become a regional e-commerce
logistics player and has already captured growth in the area with its recent
acquisitions in logistics. With the e-commerce boom in Asia, we believe that it
is positioned to capture the growth potential of the region.
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Singapore Post Ltd
March 25, 2014
3. E-COMMERCE INDUSTRY & TRENDS
3.1 Global e-commerce sales driven by Asia Pacific
According to eMarketer, global business-to-consumer (B2C) e-commerce sales
are expected to grow by 20.1% in 2014 to a record US$1.5tr. This growth will be
backed by: 1) rising Internet and mobile penetration in emerging markets; 2)
rising m-commerce (mobile commerce) sales; 3) better and more secure
shipping and payment options; and 4) the penetration of new markets by global
brands. In 2012, 28.5% of global B2C e-commerce sales came from the Asia
Pacific; this number is expected to grow to 44.9% in 2017, backed by strong
e-commerce sales growth in China, Indonesia and India (Figures 14-15).
Figure 14: B2C e-commerce sales worldwide by region: Asia
Pacific is expected to make up 45% of global sales by 2017
US$ bn
2,500
50.0%
2,000
45.0%
1,500
40.0%
1,000
35.0%
Figure 15: Global B2C e-commerce sales growth will be led by
China, Indonesia and India over 2012-17
100.0%
Title:
Source:
80.0%
Please fill in the values above to have them entered in your report
60.0%
40.0%
20.0%
500
30.0%
0.0%
0
25.0%
2012
2013
Asia Pacific
Western Europe
Latin America
% Asia Pacific
2014
2015
2016
2017
-20.0%
2012
North America
Central & Eastern Europe
Middle East & Africa
2013
China
UK
Japan
SOURCES: CIMB, EMARKETER
2014
Indonesia
US
Australia
2015
2016
2017
India
South Korea
Worldwide
3.2 Rising Internet and mobile penetration in Asia
Internet and mobile broadband penetration in Asian developing nations is still
below the global average, though it is growing rapidly. Countries such as India,
Indonesia, Thailand, the Philippines, Vietnam, Malaysia and China are
expected to catch up with other developed nations and spur the increase in
global household Internet penetration, from today’s 28% to the UN Broadband
Commission’s target of 40% by 2015. By 2016, Internet Retailer expects Asia to
account for 40.6% of global internet traffic, which we think will be backed by
e-commerce-related browsing.
Given the sheer size of the population in Asia (especially China and India), an
incremental rise in Internet and mobile broadband penetration in the region
can boost e-commerce and m-commerce sales tremendously. The availability of
e-commerce and m-commerce platforms such as Amazon, Alibaba and Taobao
could further spur online retail sales.
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March 25, 2014
Figure 16: Mobile broadband penetration
per 100 inhabitants
140
Figure 17: Percentage of households
with Internet (developing countries)
120.0%
120
Title:
Source:
100.0%
Figure 18: Percentage of individuals
using the Internet
100.0%
Title:
Source:
90.0%
80.0%
Please fill in the values above to have them entered in your Please
report fill in the values above to ha
100
70.0%
80.0%
60.0%
80
50.0%
60.0%
60
Global average
40.0%
40.0%
40
Average
(Developing countries )
30.0%
20.0%
20
20.0%
10.0%
0
0.0%
0.0%
2012
2011
SOURCES: CIMB, UN BROADBAND COMMISSION
2012
2011
Figure 19: Global household Internet penetration is expected to
reach 40% by 2015, from 28%
SOURCE: CIMB RESEARCH, UN BROADBAND COMMISSION
2012
2011
Figure 20: Asia Pacific is expected to account for 40.6% of
global internet traffic by 2016
SOURCE: CIMB RESEARCH, INTERNET RETAILER
3.3 Case study: China’s Singles Day
The vast potential of Asia’s e-commerce industry is powerfully demonstrated by
one day of sales alone, on China’s Singles Day. Singles Day falls on 11 Nov (11/11)
and is the equivalent of Cyber Monday in the US, when online retailers offer
steep discounts to boost their sales during an otherwise quiet period. Singles
Day’s online sales were introduced by Alibaba in 2009 and have since enabled
China to overtake the US as the largest e-commerce market in the world.
On Singles Day in 2013, e-commerce sales from Alibaba’s two websites alone,
Tmall and Taobao, reached a record US$5.75bn – almost 2.5x the sales
managed by the US on Cyber Monday in the same year (Figure 21). China’s
m-commerce sales are also gaining strength, with mobile purchases forming a
rising percentage of total e-commerce sales. In particular, there was a 3-fold
yoy increase in Alibaba’s e-commerce sales from mobile purchases in 2013
(Figure 22).
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Singapore Post Ltd
March 25, 2014
Figure 21: Online retail sales for Alibaba during Singles Day far
exceed total e-commerce sales in the US on Cyber Monday
Figure 22: Percentage of e-commerce sales through mobile
purchases
US$ bn
Title:
Source:
18.0%
7.0
15.3%
16.0%
6.0
Please fill in the values above to have them entered in your report
14.0%
+88% yoy
5.0
12.0%
4.0
10.0%
3.0
8.0%
7.6%
8.6%
5.6%
6.0%
4.4%
2.0
4.0%
1.0
5.7%
5.0%
2.9%
2.0%
0.0
0.0%
2009
2010
2011
Alibaba's Singles Day sales
2012
2013
1Q12
U.S. Cyber Monday sales
2Q12
3Q12
China
SOURCES: CIMB, ALIBABA WEIBO, COMSCORE, BLOOMBERG INDUSTRIES
4Q12
1Q13
2Q13
3Q13
4Q13
Alibaba's Singles Day
SOURCES: CIMB, IRESEARCH, ALIBABA WEIBO, BLOOMBERG BUSINESSWEEK
According to Bain & Co., China’s e-commerce market already surpassed that of
the US in 2013 and is set to grow at a CAGR of 32% from 2012 to 2015, vs. the
US’s 13%. Online retail sales as a proportion of total retail sales in China also
surpassed that of other developed countries in 2012, especially in Tier-1 and -2
cities (Figure 24).
Figure 23: China’s e-commerce market surpassed that of the US in 2013
SOURCE: CIMB RESEARCH, BAIN & CO.
Singles Day’s tremendous e-commerce sales volumes in a single day amply
illustrate the vast potential of the e-commerce industry in China, in our view.
We believe that the country’s e-commerce sales volumes can grow significantly
if sales volumes pick up on the other days of the year as well.
Elsewhere in Asia, rising Internet and mobile broadband penetration, especially
in the populous countries of India and Indonesia, can propel the global
e-commerce industry to a market size of US$2.3tr by 2017, according to
eMarketer, almost double today’s size of US$1.2tr.
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March 25, 2014
3.4 Types of e-commerce logistics providers
e-commerce logistics providers in Asia typically compete in one of two ways:
service quality or pricing. The two are usually mutually exclusive, as their
business model makes it difficult for them to deliver both, since the former
approach maximises revenue per customer while the latter is a volume game.
1) Service quality
Companies that focus on service quality include large players such as
DHL, FedEx and UPS. These companies provide an extensive range of
services (from warehousing, pick-and-pack, returns management to
delivery) and compete on the speed of delivery to customers.
Customers are typically higher up the value chain and can afford to pay
for higher-quality services. Customer relationships also tend to be
sticky as these logistics companies provide a comprehensive suite of
solutions, which maximise their revenue per customer.
2) Pricing
Logistics providers that compete in this segment typically provide
low-margin and less-value-added services such as last-mile delivery,
and thus have to compete on volumes. These companies usually focus
on a niche area (providing one type of service or becoming the market
leader in a certain geographical area) and provide competitive pricing
to capture higher volumes. Local postal providers also fall in this
category, as they provide basic low-cost delivery solutions to customers
across the country, including outer-lying cities which are typically not
accessed by other providers.
Regional express
delivery companies
e.g. FedEx, UPS, DHL
SingPost
Key:
Compete on service
quality and offering
Compete on price
3PL providers
Low
Service quality and range
High
Figure 24: e-commerce logistics providers compete on service quality or pricing
High
Low
Pricing
SOURCE: CIMB RESEARCH, COMPANY
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March 25, 2014
4. OPPORTUNITIES FOR SINGPOST
4.1 Fill the gap in e-commerce logistics market
Identifying the gap. Given that e-commerce logistics players either compete
on a range of services or pricing, there is a clear gap in the market, to provide
low-cost end-to-end e-commerce logistics solutions. No player has been
able to deliver both, as logistics providers in the first category typically charge a
premium for providing a wide range of high-quality services, while those in the
second category need to build sufficient scale and expertise in a particular type
of service to offer competitive rates.
SingPost can fill this gap. Unlike typical e-commerce logistics providers,
SingPost is in a unique position to fill this gap. It can offer a wide range of
e-commerce logistics solutions at very competitive rates, through:
1) Its recent acquisitions of businesses across the e-commerce logistics supply
chain, which have enhanced its service offerings; and
2) Its postal-to-postal network, bilateral agreements with other countries and
investments/joint ventures with couriers and delivery companies in Asia,
which enable it to offer low-cost delivery solutions across a wide network.
Figure 25: SingPost provides low-cost end-to-end e-commerce logistics solutions
through its subsidiaries and partners
SOURCE: CIMB RESEARCH, SINGPOST
Unique business model. SingPost’s model is difficult to replicate, as other
3PL providers are unable to gain access to the low postal-to-postal rates offered
to national postal service providers by the UPU. Large international players
such as FedEx and DHL which can offer end-to-end e-commerce logistics
solutions, are unable to offer their services at low costs due to their positioning
at the top end of the market. The only competitors which can provide such
services at similarly low costs are other national postal service providers, which
can sign bilateral agreements with other countries on lower postal rates.
However, SingPost is the only national postal player in Asia that has moved up
the e-commerce logistics supply chain to provide other services, in addition to
last-mile delivery. Most national postal service providers in Asia are still
government-owned and have to meet certain mandates, which make it difficult
for them to move into e-commerce logistics. The only other postal organisation
that provides similar offerings is Italy’s Poste Italiane, but Italiane focuses on
Europe.
4.2 Capturing its rapidly-growing target audience
We expect SingPost’s offerings to appeal the most to the following groups:
1) Online retailers selling low-price items
SingPost’s services will likely attract lower-margin, higher-volume
businesses in the apparel and FMCG segments. These companies are the
most cost-sensitive and at the same time, require a full suite of services,
ranging from front-end solutions such as marketing and customer care to
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Singapore Post Ltd
March 25, 2014
inventory management, pick-and-pack and last-mile delivery. SingPost’s
existing customers include Zalora, Adidas, Canon, Toshiba and Philips.
According to eMarketer, the apparel & accessories and F&B segments are
expected to lead e-commerce growth in the US over 2012-17 (Figure 26).
We expect the same segments to drive e-commerce growth in Asia, which
will complement SingPost’s offerings.
Figure 26: US e-commerce retail sales CAGR from 2012 to 2017, by product category
Apparel & accessories
17.2%
Food & beverage
17.0%
Books/music/video
16.3%
Toys & hobby
16.2%
Computer & consumer electronics
15.3%
Furniture & home furnishings
14.8%
Health & personal care
14.2%
Office equipment & supplies
9.2%
Auto & parts
9.2%
Other
7.7%
Total
14.0%
0%
5%
10%
15%
20%
2) International businesses looking to expand in Asia
SingPost’s expertise and knowledge of Asian markets, as well as its delivery
network in the region, should render it attractive to international
businesses looking to expand their e-commerce presence in Asia. For
example, Adidas has outsourced its entire online business in Singapore,
Malaysia, Thailand and the Philippines to SingPost and is looking to
expand in other ASEAN countries through SingPost’s network. Given that
Asia is such a huge market for e-commerce and is growing the fastest, more
international retailers are likely to expand in the region.
4.3 M&A opportunities
SingPost has been successful in its recent acquisitions and further M&As
remain on the cards. It intends to fund future M&As with cash left over after its
capex and dividends and will raise funds only when needed.
We have identified the following possible M&A targets that can enhance
SingPost’s capabilities and offerings:
1) Low-cost couriers in Asia. These companies can offer customers
better-quality and faster delivery alternatives to the local postal network.
Currently, SingPost offers last-mile delivery in Singapore and to certain
cities in Malaysia, Vietnam, India, Thailand and the Philippines through its
subsidiaries and JVs, but still lacks such an offering in other Asian
countries such as Indonesia and China.
2) e-commerce logistics providers. SingPost’s regional logistics presence
is supported by Quantium Solutions, which has close to 20 warehouses in
12 countries. Quantium has a stronger presence in markets such as India,
but fewer capabilities and warehouses in other markets. SingPost could
potentially look at acquisitions along the e-commerce logistics supply chain
to strengthen its offerings in existing markets or even new markets.
3) Mobile commerce platforms. Given the rising penetration of mobile
broadband in Asia and growing e-commerce sales from m-commerce, the
acquisition of mobile commerce platforms is possible. SingPost operates an
e-commerce website called omigo.com, which allows SMEs and start-ups to
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Singapore Post Ltd
March 25, 2014
list their products for sale. SingPost can deepen its offerings by providing a
mobile platform as well.
4) Payment solutions. A lack of reliable online payment and collection
systems is another issue for the e-commerce industry in Asia. With the
acquisition of a payment solutions provider, SingPost can offer secure
real-time payment processing capabilities to enhance its suite of front-end
e-commerce logistics offerings.
Figure 27: SWOT analysis
Strengths
● Low distribution costs with its postal-to-postal network
● Successful integration of recent acquisitions
● Strategic transformation will position it for future growth
Opportunities
● Demand for low-cost regional e-commerce distribution
● Demand for end-to-end e-commerce logistics solutions
● Digitization of mail and business processes
Weaknesses
● Declining letter volumes
● Low pricing power due to government regulations
● Susceptible to ASEAN economic conditions
Threats
● M&A and execution risk
● Rising delivery and labor costs
● Competition from 3PL providers and postal companies
SOURCE: CIMB RESEARCH, COMPANY
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March 25, 2014
5. RISKS
5.1 M&A and execution risks
SingPost is still pursuing M&As, as it strives to expand its capabilities and
presence in the region. With these deals come M&A and execution risks,
especially when entering a new business or market. SingPost may encounter
problems running its acquired businesses without prior knowledge or expertise
in the area, and may also face difficulties integrating them with its existing
business. Furthermore, SingPost may have to incur goodwill, especially when
acquiring asset-light companies. In 4QFY13, SingPost recorded a S$95.3m
increase in intangible assets after acquiring 62.5% of Famous Holdings for
S$60m and 100% of General Storage for S$37m.
To mitigate these risks, SingPost has the following criteria for its M&As:
1) Its targets must be profitable
2) Valuations must be lower than SingPost’s (on a P/E basis)
3) A minimum return on invested capital (ROIC) of 15%.
SingPost also tries to retain the key management of its acquired companies to
ensure a smooth business transition after merger.
5.2 Rising delivery costs
While SingPost enjoys low postal-to-postal rates, these rates have been
increasing since 2008, and are set to rise further in the near future. UPU’s 192
member countries are grouped as developed countries and developing
countries. Developing countries enjoy higher concessions on postal-to-postal
rates than developed countries. Singapore was previously grouped under
developing countries along with Hong Kong and Korea, but has been placed in
the transition category since 2008. It will eventually be grouped as a developed
country in the next few years, which entitles it to lower concessions. This may
put pressure on SingPost’s margins and increase its volume-related expenses.
5.3 Talent drain and rising labour costs
In addition to rising delivery costs, margins in the mail business have also been
affected by rising labour costs. SingPost is investing in mail-sorting equipment
to reduce its manpower costs but still needs to employ mailmen to deliver mail
to recipients. Costlier labour, especially at the lower end of the spectrum, is a
concern in Singapore and other Asian countries, given rising minimum wages.
At the other end of the labour spectrum, the problem is securing talent, rather
than cost. With its aggressive acquisitions across multiple business lines,
SingPost has to secure new talent with expertise in expansion to help it
integrate its newly-acquired entities. While such talent does not come cheap, a
more pressing issue is the ability to find experienced hires who can guide the
strategic direction of its business.
5.4 Competition
SingPost is in a unique position to fill the gap in e-commerce logistics, by
providing a whole spectrum of e-commerce logistics solutions at low costs.
SingPost’s main competitors would be other postal providers with access to low
postal-to-postal rates or have signed bilateral agreements with other countries
on lower rates. However, SingPost is the only postal provider in Asia that has
expanded in the e-commerce logistics space and other postal companies may
find it difficult to replicate its model due to their government mandates. The
only other postal provider that provides similar offerings is Poste Italiane, but it
focuses mainly on Europe and to a certain extent, China.
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March 25, 2014
5.5 Slowdown in Asian economies
SingPost has been focusing its expansion on ASEAN and Asia to take advantage
of the health of the economies in these countries. Although an economic
slowdown in China will not bode well for consumer sentiment in the region,
this can be countered by the Chinese government’s efforts to spur domestic
consumption, which should boost retail and e-commerce volumes.
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March 25, 2014
6. FINANCIALS
6.1 Revenue growth driven by e-commerce
We expect SingPost’s revenue growth to be led by e-commerce, which will have
a positive impact on all its three businesses. Its mail segment should benefit
from higher parcel volumes as e-commerce sales pick up, while logistics
revenue should grow with new customer acquisitions in new geographies.
Retail & e-commerce should benefit from front-end e-commerce services such
as digital marketing and customer care through SP e-commerce, and also
greater customer traction via vPOST’s consolidation and international shipping
services.
Figure 28: Mail revenue breakdown
Figure 29: Logistics revenue breakdown
S$m
S$m
600
500
Figure 30: Retail revenue breakdown
S$m
Title:
Source:
450
Title:
Source:
70
60
500
400
Please fill in the values above to have them entered in your
Please
report
fill in the values above to
50
350
400
300
300
40
250
30
200
200
150
20
100
100
10
50
0
Domestic mail
0
International mail
Hybrid mail
Philatelic
0
Quantium Solutions
Famous Holdings
Logistics
Retail & e-Commerce
Financial services
We forecast 28.2% yoy revenue growth for FY14, led by full-year contributions
from Famous Holdings (in which SingPost acquired a 62.5% stake in 4QFY13),
vs. only one quarter of contributions a year earlier. We have factored in
4.5-5.0% yoy revenue growth from FY15 to FY17, broadly in line with SingPost’s
growth ex-acquisitions. Upside could come from acquisitions, which tend to lift
its revenue growth significantly (Figure 6).
Figure 31: Sensitivity of FY15 earnings growth to revenue growth and net margins
Revenue growth
Net
margin
2.5%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
13%
-22.1%
-20.2%
-16.4%
-12.6%
-8.8%
-5.0%
-1.2%
14%
-16.1%
-14.0%
-9.9%
-5.9%
-1.8%
2.3%
6.4%
15%
-10.1%
-7.9%
-3.5%
0.9%
5.3%
9.6%
14.0%
16%
-4.1%
-1.8%
2.9%
7.6%
12.3%
17.0%
21.6%
17%
1.9%
4.4%
9.3%
14.3%
19.3%
24.3%
29.2%
Acquisitions are likely to be in lower-margin businesses, especially to expand its
e-commerce logistics segment, but these can drive strong revenue growth.
Based on our sensitivity analysis, its earnings could grow by 10-22% in FY15 if
net margins fall to 15-16% and its revenue grows by 25-30% after acquisitions
(in line with its historical trends after acquisitions). Our current assumption of
a 17.2% net margin and 4.5% revenue growth for FY15 imply 4.9% earnings
growth ex-acquisitions.
20
Singapore Post Ltd
March 25, 2014
6.2 Growing capex, but still forms only 25% of operating cash
flow
Postal capex. As part of its aim to protect its core competency in mail and to
remain relevant in trusted communications, SingPost has budgeted S$100m for
refreshing its postal infrastructure system and improving productivity and
service quality. It plans to invest the S$100m over three years starting FY14,
consisting of:
1) S$60m for postal infrastructure
SingPost plans to spend S$45m on new mail-sorting equipment. This will
replace its existing assets bought in 1997 and increase its mail-sorting
capacity by 17% and automation rate to 95%. The new equipment will have
newly-added parcel-sorting capabilities and free up space at its existing
premises. The remaining S$15m will be used for other postal infrastructure,
to improve productivity.
2) S$30m for postal improvements
SingPost aims to spend half of the S$30m to increase the number of POP
(Pick Own Parcel) stations in Singapore from 30 to 100 by end-FY15. These
stations will allow customers to pick up their parcels at their convenience,
24/7. The remaining funds will be used for refreshing its existing post
offices to include more self-service capabilities and enhance its service
quality.
Figure 32: POP Stations allow customers to pick up their
parcels 24/7 at the nearest location with the scan of a barcode
Figure 33: Newly refurbished post office with POP Stations and
more self-service options to reduce waiting time
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
3) S$10m for SingPost Inclusivity Fund (SPIF)
SingPost launched the SPIF in 2013. Over 70% of the funds will be used to
help lower-income staff cope with rising costs of living, while the remainder
will be used for training and developing its staff, as well as help support
their children’s education.
The bulk of the capex is expected to be recognised in FY15, in view of SingPost’s
plans to install and operate its mail-sorting machinery by end-2014 and open
100 POP Stations by FY15.
Maintenance capex. SingPost has spent S$12.3m-26.1m on capex a year,
representing 1.9-4.5% of its revenue. The money is typically spent on upkeeping
its assets, including its fleet of vehicles, buildings and IT systems. Going
forward, we expect a similar level of maintenance capex.
Total capex only takes up 25% of operating cash flow. Given SingPost’s
expected operating cash flow of S$180-210m per year, capex of $30-70m per
year from FY14-16 means that on average, investments only take up 25% of
operating cash flow. This leaves ample cash to meet SingPost’s minimum
dividend payout and for M&A opportunities.
21
Singapore Post Ltd
March 25, 2014
6.3 Dividends not threatened
Dividend policy. SingPost has a policy of paying a minimum of 1.25 cts/share
a quarter, for a total of 5 cts/share a year. The board decides on the variable
component at year-end and always sets aside cash for dividends before
considering new acquisitions or investments.
Sufficient operating cash flow for dividends. SingPost has been paying
annual dividends of 6.25 cts/share consistently, and we have assumed constant
annual DPS of 6.25 cts going forward. This requires S$120m in cash flow per
year, which can be accounted for using operating cash flow of S$180-210m.
Even after factoring in the aggressive S$100m capex plans in FY14-16 and
maintenance capex requirements, there is still sufficient operating cash flow to
meet the DPS of 6.25 cts, with leftover cash for M&A opportunities (Figure 35).
Dividend yield. Our DPS assumption of 6.25 cts is equivalent to 4.7%
dividend yield at current share price.
6.4 Net cash gives ammunition to pursue M&A
In addition to leftover cash from operations, SingPost’s net cash position of
S$135m gives it added ammunition to pursue M&A opportunities. Given its
intention to transform into a regional e-commerce logistics player, it can use its
cash pile to “buy” earnings. SingPost has guided that it will be able to fund
potential acquisitions using its cash, though it may take on more debt as and
when needed.
Figure 34: Debt, cash and net gearing
Figure 35: Uses of operating cash flow
S$m
x
S$m
600
1.0
250
Title:
Source:
0.8
400
0.6
200
200
0.4
31.4
0
0.2
(200)
0.0
48.4entered in your rep
Please fill in the values above to have them
72.2
3.4
33.3
150
(0.2)
100
(400)
(0.4)
(600)
(0.6)
(800)
50
(0.8)
0
FY12
Short-term debt (LHS)
Cash (LHS)
Long-term debt (LHS)
Net gearing (RHS)
FY13
Dividends
FY14F
Capex
FY15F
FY16F
Leftover for M&A
Based on SingPost’s guidance that it only acquires companies with lower P/E
than its own, we studied the upside to our FY15 earnings forecast and the
implied FY15 earnings growth assuming that SingPost uses the S$135m in net
cash to fund acquisitions. Our sensitivity analysis shows that if SingPost
acquires new companies with P/E of 6-18x, the S$135m investment can add
5-15% upside to our FY15 earnings forecast. This implies 10-21%
earnings growth in FY15, broadly in-line with our prior analysis of 25-30%
revenue growth and 15-16% overall net margin (Figure 31). This compares to
our 4.9% earnings growth forecast for FY15 ex-acquisitions.
22
Singapore Post Ltd
March 25, 2014
Figure 36: Upside to FY15F earnings assuming S$135m net cash is used for M&A
P/E of acquired business (x)
6.0
9.0
12.0
15.0
Incremental earnings (S$m)
22.5
15.0
11.3
9.0
18.0
7.5
New FY15F net profit (S$m)
174.0
166.5
162.7
160.5
159.0
Current FY15F net profit (S$m)
151.5
151.5
151.5
151.5
151.5
Upside to FY15F earnings forecast
14.9%
9.9%
7.4%
5.9%
5.0%
Implied FY15F earnings growth
20.5%
15.3%
12.7%
11.1%
10.1%
Current FY15F earnings growth
4.9%
4.9%
4.9%
4.9%
4.9%
6.5 Margin pressure from ongoing transformation
As a result of its shift to lower-margin e-commerce and logistics, SingPost’s
margins have come under pressure and could remain depressed in the medium
term, especially as revenue contributions from mail decline. PBT margins fell
from 37.1% in FY10 to 25.3% in FY13, while net margins dwindled from 31.4%
to 20.7% over the same period.
Figure 37: PBT and net margin fall with lower contribution from the mail segment
40.0%
90.0%
35.0%
80.0%
70.0%
30.0%
60.0%
25.0%
50.0%
20.0%
40.0%
15.0%
30.0%
10.0%
20.0%
5.0%
10.0%
0.0%
0.0%
FY09
FY10
FY11
% revenue from mail (RHS)
FY12
FY13
FY14F
PBT margin (LHS)
FY15F
FY16F
Net margin (LHS)
Figure 38: Sources of margin pressure and mitigating factors
Segment
Sources of margin pressure
Mitigating factors put in place
Rising labor cost
Wage inflation and rising minimum wage
1) New mail sorting equipment will increase the proportion of mechanized processes
2) New POP Stations will lead to more customers picking up their own parcels and reduce the
need for last mile delivery
Rising delivery cost
Higher postal-to-postal rates as Singapore transitions to
the Developed Country category under the UPU
1) Investments in low-cost couriers
2) Bilateral agreements with other countries
Low capacity utilization
Warehouses are operating at below full capacity
1) Acquired Lock + Store (self-storage solutions) to enhance yield at its industrial properties
2) New customer acquisition through marketing intiatives and cross-selling to existing customers
Acquisition of lower-margin businesses
e.g. freight forwarding
1) Compensate for lower margin with higher volumes through new customer acquisition and crossselling to existing customers
Mail
Logistics
Overall, we see room for margin expansion when operational efficiencies kick in
after transformation. If SingPost can enlarge its clientele in e-commerce
logistics, it can capture higher margins with higher capacity utilisation at its
warehouses. Margin expansion can also come from a larger number of
customers engaging the company for a full suite of end-to-end e-commerce
logistics solutions, as client relationships will be stickier and SingPost can have
better pricing power.
23
Singapore Post Ltd
March 25, 2014
7. VALUATION AND RECOMMENDATION
7.1 Valuation
We use DCF valuation to arrive at our target price of S$1.55 (WACC 7.3%). This
implies 20.4x CY16 P/E (2 s.d. above its 3-year mean), which we think is not
excessive given SingPost’s growth potential after its transformation (not yet
factored in). SingPost also rewards its shareholders with dividend yields of
4.7%, which adds to its attractiveness.
Figure 39: Discounted cash flow model
2014
PATMI
144,420
Add: Depreciation
Less: Capital expenditures
Less: Changes in working capital
Unlevered free cash flow
PV of FCF
2016
2017
161,630
170,641
34,619
37,678
41,239
40,432
(30,402)
(69,745)
(41,723)
(14,608)
(791)
147,846
WACC
2015
151,499
(1,952)
117,481
1,712
6,875
162,857
203,341
7.3%
7.3%
7.3%
7.3%
147,846
109,439
141,325
164,378
WACC
Risk-free rate
3%
Market risk premium
9%
Beta
0.7
Cost of equity
9%
Cost of debt
5%
Tax rate
17%
After-tax cost of debt
4%
Equity to total capitalization
60%
WACC
7.3%
PGM
Terminal growth rate
1%
Terminal value
3,235,263
WACC
7.3%
PV of terminal value
2,615,338
Enterprise value
3,178,326
Less: debt
(235,128)
Add: cash
340,262
Less: minority interest
(1,826)
Equity value
3,281,633
Shares outstanding
2,120,917
Equity value per share
$1.55
Figure 40: Sensitivity of equity value per share to terminal growth and WACC
WACC
0.5%
Terminal growth rate
1.0%
1.5%
2.0%
6.0%
1.79
1.95
2.14
2.37
6.5%
1.65
1.78
1.93
2.12
7.0%
1.53
1.63
1.76
1.91
7.5%
1.42
1.51
1.62
1.74
8.0%
1.33
1.41
1.50
1.61
24
Singapore Post Ltd
March 25, 2014
7.2 Initiate with Add
SingPost has a clear vision of what it wants to become: the leading e-commerce
logistics solutions provider in Asia. With the success of its recent acquisitions in
the logistics space and its unique ability to provide end-to-end e-commerce
logistics solutions at low costs, it should be able to capture the tremendous
growth opportunities in the e-commerce industry, in our view. At the same time,
its investments in new technology and infrastructure should help it remain
competitive and relevant in its core mail segment and sustain its margins as it
shifts to lower-margin, higher volume businesses.
SingPost is trading at 18.9x CY15 P/E (1 s.d. above its 3-year historical mean).
We think that as it completes its transformation into a leading e-commerce
logistics solutions provider in Asia, its stronger growth profile will warrant
higher multiples. Investors have rewarded logistics companies with exposure to
China’s e-commerce (such as Yamato Holdings, 9064 JP, Not Rated and Kerry
Logistics, 636 HK, Add) with high forward P/E multiples of 20-23x. With
SingPost’s rising exposure to Asian e-commerce, we believe it can trade up to
similar levels.
Figure 41: SingPost is trading at 18.9x rolling forward P/E
21.0
20.0
19.0
18.0
17.0
16.0
15.0
14.0
13.0
1/4/2011
1/10/2011
Rolling fwd P/E
1/4/2012
1/10/2012
Average
+1 SD
1/4/2013
+2 SD
1/10/2013
-1 SD
-2 SD
SOURCES: CIMB, BLOOMBERG, SINGPOST
Figure 42: Peers Comparison
Company
Singapore Post Ltd
Yamato Holdings Co Ltd
FedEx Corp
United Parcel Service Inc
Pos Malaysia BHD
Royal Mail PLC
Deutsche Post AG
Bloomberg
Ticker
SPOST SP
636 HK
9064 JP
FDX US
UPS US
POSM MK
RMG LN
DPW GR
Recom.
Price
(lcl curr)
Target
Price
(lcl curr)
Market
Cap
(US$ m)
Add
Add
rated
rated
rated
rated
rated
rated
1.33
11.26
2,143
135.0
97.34
4.75
574.5
26.63
1.55
15.50
na
na
na
na
na
na
2,001
2,453
9,523
39,880
89,489
771
9,479
44,474
Not
Not
Not
Not
Not
Not
Simple average
Core P/E (x)
CY2014 CY2015
18.8
20.0
22.8
17.2
18.6
14.8
13.5
15.8
17.8
17.4
20.2
13.7
16.4
12.6
11.5
14.1
17.7
15.5
3-year EPS
CAGR (%)
P/BV (x)
CY2014
Recurring
ROE (%)
CY2014
Dividend
Yield (%)
CY2014
5.5%
34.7%
-31.4%
-9.7%
12.5%
-29.8%
-21.1%
5.2%
3.66
1.34
1.56
2.42
17.04
2.35
1.79
2.94
22.0%
6.9%
7.1%
13.7%
97.9%
16.1%
14.6%
19.3%
4.7%
1.0%
1.2%
0.5%
2.7%
3.4%
3.6%
3.2%
-4.3%
4.17
24.7%
2.6%
SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG
25
Singapore Post Ltd
March 25, 2014
8. APPENDIX
8.1 Management profiles
Mr. Lim Ho Kee, Chairman
Mr Lim was appointed a director of SingPost in 1998 and has more than 35
years of financial experience in the public and private sectors. He has been a
director of Keppel Land since 2001 and is currently a director at Jardine Cycle
& Carriage Limited. Mr Lim’s career includes directorships at UBS A.G.,
Singapore Telecommunications Limited, MCL Land Limited and Transcu
Group Limited. He has also held positions as Executive Vice President of the
UBS Group, and Chief Executive Officer and Chairman of UBS East Asia. In the
public sector, Mr Lim had served on the board of the Civil Service College and
the Singapore Government’s Public Sector Divestment Committee. He also
previously sat on the Singapore Government’s Economic Planning Committee.
Mr Lim obtained his Bachelor of Science degree in Economics from the London
School of Economics.
Dr. Wolfgang Baier, Group CEO
Dr. Baier was appointed Group Chief Executive Officer in 2011 and has almost
15 years of experience in international postal services and logistics. He has
plans for SingPost to become a regional company, by harnessing the rapidly
expanding e-commerce and logistics market. Prior to joining SingPost, Dr Baier
worked with McKinsey & Company in Europe and Asia for 10 years and was a
partner at its Singapore office. He led the transportation and logistics team, as
well as operations at McKinsey South-East Asia. He has also been a
non-Independent and non-Executive Director of GD Express Carrier Bhd since
2012. Dr Baier obtained his Master of Laws and Ph.D (with distinction) in Law
from the University of Vienna, and a Master of Business Economics from the
University of Exeter and Graz.
Mr. Ng Hin Lee, Group CFO
Mr Ng joined SingPost in 2006, bringing with him more than 20 years of
experience in key financial and managerial positions. In Oct 11, he was
appointed Group Chief Financial Officer, overseeing SingPost’s strategic
acquisitions, finance and property management. Before his position at SingPost,
Mr Ng was an Executive Director at Valen Technologies (S) Pte Ltd. He also
previously worked at KPMG, Data General Hong Kong Ltd, Banque Paribas
(Singapore Branch) and Gul Technologies Singapore Ltd. Mr Ng is the
Chairman of Singapore Post Enterprise Private Limited and sits on the board of
several SingPost subsidiaries and associates, including Clout Shoppe (Ayer
Rajah) Pte Ltd, Lock+Store Ltd, SingPost Investments Pte Ltd, General Storage
Company Pte Ltd, SingPost Storage Company Limited, Shenzhen 4PX Express
Co., The Innovations Group, Inc, Proiam, Inc, Limited and Efficient
E-Solutions Berhad. Mr Ng received his Bachelor of Accountancy degree from
the University of Singapore and is a Fellow Member of the Institute of Certified
Public Accountants of Singapore.
8.2 SingPost’s five new pillars of growth
Under the leadership of CEO Dr. Wolfgang Baier, SingPost has been
undergoing an accelerated transformation programme to expand its three core
business segments into five. Its five new segments are: 1) mail; 2) digital
services; 3) regional logistics; 4) retail; and 5) e-commerce.
26
Singapore Post Ltd
March 25, 2014
Figure 43: Accelerated transformation: branching out from three business segments
to five
Mail
Mail
Digital Services
Logistics
Regional Logistics
Retail
Retail & e-Commerce
e-Commerce
Mail
The mail segment comprises domestic mail and international mail and has
been SingPost’s bread-and-butter since its inception.
1) Domestic mail. This segment remains its single largest revenue
contributor. The bulk of the business used to come from delivering letter
mail but recently, there has been a pick-up in parcel volumes, in tandem
with robust e-commerce growth.
2) International mail comprises incoming and outgoing mail. Revenue
from the segment has picked up noticeably in recent quarters, driven by the
transhipment of e-commerce packages from North Asia to ASEAN.
Digital services
With declining letter volumes, SingPost is branching out to digital services by
leveraging technology to remain relevant to its customers. It has made several
acquisitions and formed joint ventures with companies in Hong Kong, Malaysia,
the Philippines and Thailand to expand its network and offerings in the region.
Through these acquisitions and partnerships, it now offers a suite of
data-management and printing services to businesses which wish to outsource
such non-core processes.
Figure 44: Acquisitions and JVs in digital services
Company
Country
Stake
Description
Provision of security printing, document management and
transaction mail
Provision of data print, record management, data and document
processing
Novation Solutions
Hong Kong
100%
Efficient E-Solutions
Malaysia
21%
ePDS, Inc.
Philippines
33%
Provision of electronic printing and despatching services
Thai British Dpost
Company Limited
Thailand
49%
Provision of laser printing and enveloping services
Regional logistics
SingPost aims to be the regional leader in e-commerce logistics and the
choice partner for international eTailers wishing to expand in Asia. Through its
subsidiaries, associates and postal-to-postal network, SingPost is able to offer a
wide range of e-fulfilment solutions, including warehousing, inventory
management, pick-and-pack, delivery and returns management across 12
countries in the Asia Pacific. In the near term, SingPost plans to build a niche in
ASEAN before expanding further in the Asia Pacific.
1) Quantium Solutions. SingPost acquired a 100% stake in Quantium
Solutions (formerly known as G3 Worldwide Aspac Pte Ltd) in May 09.
Quantium is a logistics and fulfilment services provider with over 20
27
Singapore Post Ltd
March 25, 2014
warehouses in 12 countries. SingPost intends to use Quantium as the main
vehicle for its regional expansion in e-commerce logistics as Quantium has
comprehensive e-commerce logistics solutions in Australia, Hong Kong,
India, Japan, Malaysia, New Zealand, the Philippines, Singapore, Taiwan,
Thailand, and most recently, Indonesia.
2) Famous Holdings. SingPost acquired Famous Holdings, a freight
forwarder, in Feb 13. Famous has strategic alliances with consolidators
worldwide and provides services such as sea freight, air freight,
warehousing and container-trucking services. Famous contributed 34.6%
to its 9MFY14 logistics revenue.
Figure 45: SingPost has a strong logistics network in the Asia Pacific through its
subsidiaries, associates and local postal partners
SOURCE: CIMB RESEARCH, COMPANY REPORTS
Retail
SingPost offers financial services such as remittances, insurance, financial
planning, personal loans and credit cards through its network of post offices. It
also offers bill payment, ticketing and other government and agency services
through its network of SAM machines (24-hour automated post office).
e-commerce
SingPost offers front-end e-commerce solutions such as digital marketing and
the setting up of online stores through SP eCommerce. These form part of its
end-to-end e-commerce logistics services. It also operates an online
luxury-goods store called Clout Shoppe and offers SMEs a platform to sell their
products online through a website dubbed omigo.com. In addition, SingPost
operates vPOST, which provides warehousing and shipping services for online
purchases. It currently ships parcels from the US, Europe and Japan to
Singapore, Australia, India, Malaysia and Thailand, and also offers shipping
from China to Singapore.
28
Singapore Post Ltd
March 25, 2014
8.3 Properties
SingPost has 17 properties in Singapore: 10 post offices, five delivery bases, an
airmail transit centre and the Singapore Post Centre, which houses its
headquarters and mail-sorting centre. Other properties such as logistics
warehouses owned by SingPost’s subsidiaries are not included in this list.
The Singapore Post Centre is the largest property owned by SingPost,
accounting for 74.3% of its total GFA owned. SingPost occupies 45% of the
building and leases out 10-15% of the space to retailers and another 40-45% as
office space. The building is recorded on its books at historical cost, which is
way below today’s market value. Investors have been excited at the possibility
of a divestment of this asset through a sale and leaseback agreement and the
payment of special dividends from the proceeds of the sale, but we think this is
unlikely given rising rental costs.
Figure 46: SingPost’s major properties
SOURCE: CIMB RESEARCH, SINGPOST
29
Singapore Post Ltd
March 25, 2014
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(i) As of March 25, 2014 CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the
following company or companies covered or recommended in this report:
(a) Singapore Post Ltd
(ii) As of March 25, 2014, the analyst(s) who prepared this report, has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any
other derivatives) in the following company or companies covered or recommended in this report:
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instrument.
30
Singapore Post Ltd
March 25, 2014
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As of March 25, 2014, CIMBR does not have a proprietary position in the recommended securities in this report.
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The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used
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owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.
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in whole or in part, for any purpose without the prior written consent of CIMBS.
Corporate Governance Report:
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and
Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed
to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on
inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does
not confirm nor certify the accuracy of such survey result.
Score Range:
90 – 100
80 – 89
70 – 79
Below 70 or
No Survey Result
Description:
Excellent
Very Good
Good
N/A
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United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is
31
Singapore Post Ltd
March 25, 2014
authorised and regulated by the Financial Services Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely
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Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment
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legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research.
United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB
Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited,
CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act
of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities
and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The
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in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.
Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated
investors as defined in the laws and regulations of such jurisdictions.
Distribution of stock ratings and investment banking clients for quarter ended on 28 February 2014
1347 companies under coverage for quarter ended on 28 February 2014
Rating Distribution (%)
Investment Banking clients (%)
Outperform/Buy/Trading Buy/Add
52.1%
6.4%
Neutral/Hold
31.8%
5.6%
Underperform/Sell/Trading Sell/Reduce
16.1%
5.6%
Spitzer Chart for stock being researched ( 2 year data )
Singapore Post Ltd (SPOST SP)
Price Close
1.500
1.400
1.300
1.200
1.100
1.000
0.900
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Dec-13
As at the time of publishing this report CIMB is phasing in an absolute recommendation structure for stocks (Framework #1). Please refer to all frameworks for a definition of any
recommendations stated in this report.
CIMB Recommendation Framework #1
Stock Ratings
Add
Hold
Reduce
Definition
The stock’s total return is expected to exceed 10% over the next 12 months.
The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the
stock.
Stock price targets have an investment horizon of 12 months.
Sector Ratings
Overweight
Neutral
Underweight
Definition
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings
Overweight
Neutral
Underweight
Definition
An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
CIMB Stock Recommendation Framework #2 *
Outperform
Neutral
The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.
The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.
32
Singapore Post Ltd
March 25, 2014
Underperform
Trading Buy
Trading Sell
The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months.
The stock's total return is expected to exceed a relevant benchmark's total return by 3% or more over the next 3 months.
The stock's total return is expected to be below a relevant benchmark's total return by 3% or more over the next 3 months.
* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities
Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily
outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
CIMB Stock Recommendation Framework #3 **
Outperform
Neutral
Underperform
Trading Buy
Trading Sell
Expected positive total returns of 10% or more over the next 12 months.
Expected total returns of between -10% and +10% over the next 12 months.
Expected negative total returns of 10% or more over the next 12 months.
Expected positive total returns of 10% or more over the next 3 months.
Expected negative total returns of 10% or more over the next 3 months.
** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is
permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2013.
AAV – Good, ADVANC - Excellent, AMATA - Very Good, ANAN – Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH – Good,
BCP - Excellent, BEC - Very Good, BGH - not available, BJC – Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET – Very Good, CENTEL – Very Good, CK Excellent, CPALL - Very Good, CPF – Excellent, CPN - Excellent, DELTA - Very Good, DTAC - Excellent, EGCO – Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY –
Excellent, HANA - Excellent, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Excellent, ITD – Very Good, IVL - Excellent, JAS – Very Good, KAMART – not available,
KBANK - Excellent, KKP – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR – Very Good, MAKRO – Very Good, MCOT - Excellent, MINT - Excellent, PS Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS – Excellent, SAMART – Excellent,
SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI – Very Good, SPALI - Excellent, STA - Good, STEC - Very Good, TCAP - Excellent, THAI - Excellent,
THCOM – Excellent, TICON – Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Excellent, TTW – Excellent, TUF - Very Good, VGI – Excellent, WORK –
Good.
33

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