Strong growth in Logistics
• Strong 2HFY22 performance due to FMH and Logistics growth
• Full year dividend of 1.8 Singapore cents declared
• Growth in eCommerce logistics volume in Singapore and Australia
2HFY22 results beat expectations ? SPOST’s 2HFY22 revenue rose 34.0% YoY to SGD934.2m, mainly due to higher contribution from the Logistics segment, partially offset by a decline in revenue from the PP and Property segments. PATMI and underlying net profit grew 188% and 53.1% YoY to SGD48.1m and SGD43.9m, respectively, above our expectations. A final dividend of 1.3 Singapore cents per share was declared, bringing total dividend for FY22 to 1.8 Singapore cents (50% of underlying net profit) compared to 1.1 Singapore cents in FY21.
eCommerce logistics accounted for 40% of DPP revenue in FY22 (+8 ppt YoY) ? In the PP segment, revenue fell 15.0% YoY to SGD296.8m, dragged by both IPP (-21.7% YoY) and domestic post and parcel (DPP) businesses (-3.3% YoY), partially offset by eCommerce logistics (+16.9% YoY). IPP’s revenue continued to be impacted by airfreight constraints. Conveyance costs remained high (~2x pre-Covid levels) in Mar 2022 due to the lack of appropriate flights as the average number of daily departing passenger flights from Changi Airport mainly attributed to narrow body aircraft flying to tourist destinations. In DPP, eCommerce logistics volume grew 19% YoY in 2HFY22, largely offsetting the continued decline in volumes of letters and printed papers. Operating profit for the PP segment was down 31.0% YoY to SGD13.5m in 2HFY22 due to the absence of government grants.
Logistics segment benefitted from higher international freight forwarding volume and the consolidation of FMH ? Separately, the Logistics segment’s revenue and operating profit grew 90.3% and ~five-fold YoY to SGD619.0m and SGD28.1m in 2HFY22, benefiting from strong growth in international freight forwarding volume and growth in Australia business from Freight Management Holdings (FMH) and CouriersPlease. Property segment’s revenue fell 8.2% in 2HFY22 due to the divestment of the self-storage business General Storage Company (GSC) in Dec 2021. For the full year, revenue was stable at SGD114.9m (-0.5% YoY) while operating profit rose 5.7% YoY to SGD52.9m. As of Mar 2022, committed occupancy at SingPost Centre was down 0.8 QoQ to 96.6% while tenant sales grew 18% YoY. After adjustments, we increase our fair value estimate from SGD0.78 to SGD0.85.
ESG Updates
Singapore Post (SPOST) outperforms its peers in environment, social and governance. SPOST leads peers on carbon mitigation initiatives. SPOST’s three-year GHG emissions remained low at 21.3 tCO2/USD million sales (FY 2018-2020) vs. industry average of 73.5, as of February 2022. In addition, SPOST has strong governance structures that appear to be generally well aligned with investor interests. Moreover, SPOST faces relatively low complexities in labour management, given its relatively small workforce vs. industry average and operations in Singapore, where frequency of labour unrest is relatively low. BUY. (Chu Peng)