FY22: Results Above Expectations, Only Getting Better Moving Forward
SPOST reported robust growth for both revenue and PATMI, driven by the logistics
segment. Domestic e-commerce volumes grew strongly but are expected to soften in
the short term. Domestic letter & mail continues its decline while international post still
faces elevated air freight costs, but is set to improve as outbound flight movements
increase. The logistics segment was the sole outperformer, backed by the completion
of a majority stake acquisition in FMH. Maintain BUY. Raise target price to S$0.90.
RESULTS
• Robust revenue and above-expectation earnings. For FY22, Singapore Post’s (SPOST)
revenue and PATMI grew to S$1,665.6m (+18.6% yoy) and S$83.1m (+74.5% yoy), forming
112% and 106% of our full-year expectations respectively. Final dividend increased to 1.3 S
cents (2HFY21: 0.6 S cents), implying a 50% earnings payout ratio and bringing FY22 fullyear dividend to 1.8 S cents (FY21: 1.1 S cents). FY22 operating profit surged 41.3% yoy to
S$112.1m, largely driven by higher operating profit from the logistics segment as Freight
Management Holdings (FMH) became a subsidiary in Nov 21, along with lower overall
corporate overhead expenses.
• Postal: Expect margin compression. Overall postal revenue (-16.3% yoy) and operating
profit (-42.9% yoy) for FY22 fell, dragged by declining letter and mail along with lower
International post & parcel (IPP) volumes. This was within our expectations as we expected
revenue and operating profit to fall 11.0% yoy and 42.3% yoy respectively. However,
excluding Job Support Scheme rebates in FY21, operating profit actually grew 3.5% yoy. For
the domestic postal segment, revenue from domestic e-commerce grew 24.1% yoy as the
increased adoption of e-commerce continues to boost volumes (+24% yoy). However,
management has noted that e-commerce volumes after the pandemic may soften in the short
term as physical malls reopen, but long-term upward trajectory remains intact. For domestic
letters and mail, revenue (-16% yoy) and volume (-10% yoy) continued its downtrend,
dragging down overall domestic postal revenue. Looking forward, SPOST plans to invest in
and upgrade existing postal infrastructure, increase cost-efficiency and improve margins,
especially for domestic e-commerce.
• IPP: Air freight costs remain high. With elevated air freight costs and lower outbound
volumes, FY22 IPP revenue (-24% yoy) and volumes (-25% yoy) shrunk. Despite Singapore
reopening its borders in 4QFY22, air freight costs remains elevated at 230% of pre-pandemic
levels. This is largely due to the majority of flights out of Changi Airport being narrow-bodied
aircrafts, coupled with these planes flying to tourist destinations instead of SPOST’s target
markets. However, as flight capacity continues to recover to pre-pandemic levels,
management is optimistic that air freight costs would eventually soften. Changi Airport’s
status as a regional air logistics hub, along with lower air freight costs, would help boost
SPOST’s IPP revenue moving forward.
• Logistics: Outperformance. Logistics revenue (+61.6% yoy) and operating profit (+293.5%
yoy) surged in FY22, beating our previous growth expectations of +25.7% and +266.5% yoy
respectively. The outperformance was driven by the completion of a majority stake in FMH
(S$178.7m revenue contribution in 4QFY22), along with soaring sea freight rates that led to
record-high profitability. Freight forwarding revenue from Famous Holdings grew 69.6% yoy
in FY22 while revenue from the Australian businesses (FMH and CouriersPlease) grew
89.5% yoy. SPOST has plans in place to ramp up consignment volumes and drive synergies
in Australia, capitalising on the growing logistics market down under. Also, for FY23, we
expect sea freight rates to remain elevated, caused by ongoing supply-chain disruptions amid
the Ukraine-Russia conflict.
• Property: Back to pre-pandemic levels. Occupancy rates at SingPost Centre (SPC) remain
high with its retail segment having full occupancy while its office space softened slightly from
95.7% to 93.5% occupancy. Management has noted that it is in the process of securing new
tenants for these office spaces. For FY22, property revenue (-0.5% yoy) and operating profit
(+5.7% yoy) have reached pre-COVID-19 levels, in line with expectations, backed by higher
footfall and tenant sales as social distancing measures ease off. The yoy drop in revenue
was due to the divestment of General Space Company in Dec 21. Management has indicated
no plans to divest its interest in SPC.
EARNINGS REVISION/RISK
• We increase our FY23 and FY24 earnings forecasts by 10.6% and 2.8% respectively
while adding our FY25 forecasts, on the back of a higher full-year earnings contribution
from FMH while decreasing our postal segmental forecasts.
VALUATION/RECOMMENDATION
• Maintain BUY with a higher SOTP-based target price of S$0.90 (S$0.86). In our view,
SPOST is on the verge of a strong recovery, driven by the growth in e-commerce and
logistics. Also, once air freight rates reach an optimal level sometime in 2HFY23/1HFY24, we
expect SPOST to ramp up IPP volumes, which will help to boost overall revenue. Therefore,
with an expected inflection point approaching and trading below -1SD (15.1x FY23F PE) of
its five-year mean PE (18.8x), we opine that SPOST has significant potential upside at
current attractive price levels.
SHARE PRICE CATALYST
• a) Pick-up in air travel, and b) lower-than-expected decline in domestic postal services.