Aug[7] - Singpost (Back to where it began)

COUNTER: Singapore Post Limited

OVERVIEW:
The well known local group is running national postal service.  It provides domestic and international postal and courier services. It also offers end-to-end e-commerce logistic solutions.

HIGHLIGHTS:
[1] Latest result saw 1Q2016 revenue leap 31% year on year. Major contribution was due to newly acquisition in eCommerce sector. Overseas segment grew up to 50% of total revenue.

[2] Its underlying net profit down 4%. Property segment down 21% because SPC retail mall is undergoing re-development. eCommerce segment registered net loss $3.5m due to continued investment in IT and operational capabilities in newly acquired business. Other segments showed stable earning.

[3] The group is in net short term liability position of S$141m. Total debt/equity ~ 30%. Management indicated sufficient banking lines for its funding needs. Most of the debt incurred for newly acquisition last year.

[4] Alibaba shall buy into additional 5% shares into the group as well as 34% stake in one joint-venture with the group, but subject to regulatory approval. The latest extension saw long-stop date falling on end of Oct. Shall the deal goes through, new injected fund could fully satisfy net liability of the group.

[5] Management revealed dividend policy under review. It might not longer pay annual dividend at 0.075 per shares as consistently as before.

INVESTMENT THEMES:
[1] Current valuation is attractive: PE~ 12.6, which is at lower zone in historical P/E chart. 

[2] The group is under transformation period meantime, thus higher finance expense and operation cost is incurred. Recent results show that the revenue income is growing tremendously with contribution from new business. Long term investor could take the recent downfall as chance to take part in the group's long term dream as regional logistics hub in future. 

PRICE TREND:
On 2014 May, the group issued new shares at $1.42 to Alibaba. Price shot up to 1.5 and followed with superb bull trend subsequently. Since 2016, it experienced management turnover, and investigation into corporate governance. Current price strength has been heading south. Strong support could be 1.29~ 1.32. Shall future dividend payout be reduced less than 10%, current price range still look attractive with dividend yield > 5%. The counter is mixed with both value and growth prospects.

*** Note: Same counter has been mentioned in Nov[5] 2015 ***