Recovery on track
? Underlying net profit recovered in 2HFY22 to S$43.9m (+17.4% hoh, +53.1%
yoy), in line with our expectations but above Bloomberg consensus.
? Logistics segment should see further growth in FY23F with full-year
consolidation of FMH and SPOST’s continued investments in Australia.
? International post and parcel business should also recover well as flight
capacity out of Changi Airport recovers. Reiterate Add and TP of S$0.90.
Good recovery in 2HFY3/22
SPOST reported 2HFY3/22 underlying net profit of S$43.9m (+17.4% hoh, +53.1% yoy).
Results were in line with our expectations but above Bloomberg consensus, with FY22
net profit of S$81.3m (+35.2% yoy) making up 98.4%/105% of our/consensus forecasts.
SPOST declared a final DPS of 1.3Scts, bringing the total DPS to 1.8Scts for FY22
(+64% yoy), though the payout ratio of 50% remains lower than its policy of 60%-80%.
Logistics to remain key growth driver
Logistics segment saw segment operating profit grow five-fold yoy to S$28.1m in
2HFY22, supported by 1) 4-month contribution from newly consolidated financials of
Freight Management Holdings (FMH), and 2) growth in freight forwarding and delivery
volumes. FMH has performed strongly since acquisition, and contributed
S$178.7m/S$4.8m revenue/net profit for the 4 months of consolidation. To strengthen its
presence in Australia, SPOST will focus on driving synergies among its Australian
businesses, particularly CouriersPlease and FMH, as well as explore opportunities
(organic and inorganic) to build scale and a comprehensive logistics platform.
Cautiously optimistic on IPP recovery
Post and Parcel also showed signs of recovery, with segment OP (excluding government
relief) growing 23.2% yoy in 2HFY22, reversing past declines. This was mainly due to
easing of Singapore’s border restrictions which helped international post and parcel (IPP)
recovery as flight capacity out of Changi Airport increased. On domestic front, ecommerce volume growth has also largely offset declines in traditional mail volumes. We
believe the IPP segment has bottomed, though recovery could be gradual, as the recent
increase in flight volumes mainly includes narrow body aircraft to tourist destinations.
China lockdowns could also result in additional cost pressures and service disruptions to
certain routes; as such, we lower our FY23-24F EPS by 2.8%-4.5%.
Reiterate Add and TP of S$0.90
Reiterate Add; we expect earnings recovery as flights via Changi gradually resume. Our
TP remains at S$0.90, based on 18.8x CY23F P/E (0.5 s.d. below historical average).
Re-rating catalysts include earnings-accretive M&A and faster flight volume increase.
Monetisation of its real estate portfolio (c.S$1bn) could also be a longer-term catalyst.
Downside risks include intensifying competition in domestic last mile delivery space
which could hinder recovery in the domestic post and parcel business.