PC WONG - s3. Slowdown in the global economy which could impact SingPost’s earnings, the Asia Pacific being its core revenue generator

PC WONG

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SINGAPORE POST LTD • Listed on the SGX under code S08. Lot size 100

• Sister company of SingTel Ltd

• Primary business:

- Mail

- Digital Services

- Logistics

- Retail & Financial Services

- eCommerce

• Operations in more than 10 countries

• Ranked top postal agency of the world in 2014


BUSINESS ENTITIES 1 • Sp eCommerce Ecommerce enabler for retailers with ecommerce

solutions

• Quantium Solutions Logistics services to businesses in the Asia Pacific region

• Courier Please Metropolitan express parcel delivery service in Australia

• Famous Holdings Freight consolidator and freight-forwarder in 7 countries

• Lock+Sore Self-storage operator in Singapore, Hong Kong and Malaysia

• Singapore Parcel Courier service in Singapore & international shipping to more than 200 global destinations

• vPost One of the largest online shopping and shipping services providers in SEA


BUSINESS ENTITIES 1 (CONT’D) • Omigo Marketplace Singapore's online marketplace for consumers to

shop and for SMEs and international brands to sell online

• SAM A digital mailbox with bill payment services anywhere, anytime

• Sample Store Singapore’s first and leading Tryvertising platform for consumers to experience products before you decide to buy them


BUSINESS ENTITIES 2


BUSINESS MOTO

TO BE A

“Regional Leader in eCommerce Logistics and Trusted Communications”

THINK BIG + ACT SMALL + FAIL FAST + LEARN QUICKLY


SUMMARY OF FINANCIALS Q1 2015

• Revenue S$280.5M in 2015 vs S$228.5M in 2014

• Net Profit S$47.2M in 2015 vs S$40.8M in 2014

• Current Assets S$764.1M

• Non Current Assets S$1,489.4M

• Total Assets S$2,253.5M

• Current Liabilities S$423.6M

• Non Current Liabilities S$315.9M

• Total Liabilities S$739.5M

• Total Equity S$1,514.0M


BENCHMARK AGAINST KPIs

Actual KPI

• Revenue Growth +22.7% +5%

• Net profit Growth (without property gain) +15.6% +10%

• Current Ratio 1.80 >1.5

• Debt to Equity Ratio 0.49 <1.0

• Dividend Yield (2014) based SP of S$1.76 4.0% >5.5%

• NAVPS 0.7042

• SP/NAVPS 2.50x <3x


KEY TAKEAWAYS • Financially sound with S$565.9M cash

• Dividend of S$0.07 for FY 2014. This an increase of 11.1% vs 2013

• Diversified earnings from various business entities to offset fall in traditional mail

• Logistics revenue surged on the back of increased ecommerce activities


DIVIDEND HISTORY 2010 S$0.0625

2011 S$0.0625

2012 S$0.0625

2013 S$0.0625

2014 S$0.0700

2015 S$0.0150 (Q1 2015)

Apart from 2014, dividend has been fixed at S$0.0625

Could be a start of better things to come as in 2014 dividend increased to S$0.0700

Using S$0.0625 as a benchmark, this represents a potential minimum yield of 3.6% based on the closing price of S$1.76 a share on 8 October, 2015


SHARE PRICE PERFORMANCE


Chart Source: Morningstar.com

52 Week Low of S$1.70 and 52 Week High of S$2.16 Current price of S$1.76 is 18.5% off its 52 week high of S$2.16

EVENTS WHICH COULD IMPACT THE STOCK NEGATIVELY

• Slowdown in the global economy which could impact SingPost’s earnings, the Asia Pacific being its core revenue generator

• Decline in its ecommerce business could also drag down its earnings as it shifts towards ecommerce and logistics as primary revenue generators

• Continued decline in domestic mail volume means a need to mitigate a continued fall of earnings in this sector – not helped by a potential slowdown in global economy


IFS ASSESSMENT: TRANSFORMING SINGPOST 1


Source: SingPost website

• May 2014 Announcement of strategic co-operation with Alibaba Group

• July 2014 Issuance and transfer of shares to Alibaba Group

• August 2014 Acquisition of customs broker and freight forwarder FS Mackenzie Ltd (UK)

• October 2014 Postage rate revision, investment in Regional eCommerce Logistics Hub and acquisition of The Store House (HK)

• December 2014 Acquisition of parcel delivery company Couriers Please (Australia)

• January 2015 Acquisition of freight forwarder Famous Pacific Shipping (NZ)

• February 2015 AXA@POST launched at post offices and co-operation with AliXpress for deliveries to Indonesia

IFS ASSESSMENT: TRANSFORMING SINGPOST 2


Source: SingPost website

• March 2015 Launch of ecommerce fulfilment solution, ezyCommerce, for SMEs and 33% in JV company with PT Trikomsel (Indonesia) to develop ecommerce business and solutions, PT Trio SPeCommerce Indonesia

• June 2015 Investment of 30% stake in Hubbed Holdings Pty Ltd a parcel delivery company in Australia

• July 2015 Acquisition of 80% stake in FPS Rotterdam, a shipping company based in Netherlands

• August 2015 Investment of 50% stake in E Link Station Limited (HK), a parcel locker business where it acts as a collection point by receiving and storing parcels on behalf of customers

IFS ASSESSMENT: SINGPOST


• BUY as it is near its 52 week low at S$1.76 but prudent to monitor regional market direction for opportunity to buy below S$1.70

• Low Risk, with strong cash balance

• Major shareholders include Temasek Holdings, SingTel Group, Alibaba Group and Softbank

• Transformation will elevate SingPost as a major ecommerce and logistics player in the Asia Pacific region

• With major acquisitions throughout 2014 – 2015, recommend to hold 2 -3 years to see fruition of transformation

• Alliance with Alibaba group could open more doors in the future

• Syariah compliant as at 8 October, 2015

SINGTEL LIMITED (ST)


• Listed on the SGX under code Z74. Lot size 100

• Serves more than 550M mobile customers globally

• Interest in: Optus (Australia)

Bharti Airtel (India, South Asia and Africa)

Telkomsel (Indonesia)

Globe Telecom (Philippines)

Advanced Info Service (Thailand)

3 DISTINCT BUSINESS UNITS


• Consumer Providing communication, infotainment and technology services to consumers and small businesses

• Group Enterprise Provides companies and governments with integrated ICT solutions covering mobile, voice and data infrastructure, managed services, cloud computing, IT services and professional consulting

• Digital Focuses on opportunities in digital marketing and data analytics

SUBSIDIARIES & ASSOCIATES


• Subsidiaries

• Associates

SUMMARY OF FINANCIALS Q1 2015/16

• Revenue S$4,249.2M in 2015 vs S$4,176.1M in 2014

• Net Profit S$941.2M in 2015 vs S$836.0M in 2014

• Current Assets S$5,643.2M

• Non Current Assets S$36,467.1M

• Total Assets S$42,110.3M

• Current Liabilities S$5,402.2M

• Non Current Liabilities S$11,354.2M

• Total Liabilities S$16,756.4M

• Total Equity S$25,353.9M


BENCHMARK AGAINST KPIs


Actual KPI

• Revenue Growth +1.7% +5%

• Net Profit Growth +12.6% +10%

• Current Ratio 1.04 >1.0

• Debt to Equity Ratio 0.66 <1.5

• Distribution Yield based SP of S$3.77 4.6% 5.5%

• NAVPS 1.59

• SP/NAVPS 2.37x <3x

KEY TAKEAWAYS


• Income from Associates and JVs contributed 11.4% of the total revenue vs 9.4% in the previous year

• Total borrowings reduced by S$299.7M compared to previous year. A 3.3% reduction

• S$1.4B cash and equivalents

• Dividend increased 4.2% from S$0.175 in 2015 to S$0.168 in 2014

DISTRIBUTION HISTORY

2010 S$0.1420

2011 S$0.2580

2012 S$0.1580

2013 S$0.1680

2014 S$0.1680

2015 S$0.1750

Steady dividend growth

Using S$0.17 as a benchmark, this represents a potential minimum yield of 4.5% based on the closing price of S$3.77 a share on 8 October, 2015


SHARE PRICE PERFORMANCE


52 Week Low of S$3.43 and 52 Week High of S$4.57 Current price of S$3.77 is 17.5% off its 52 week high of S$4.57

Chart Source: www.Morningstar.com


• Slowdown in global economy which could impact consumer behaviour and corporate spending on SingTel related services

• Intense competition in the telecommunications industry may impact upon the revenue and hence the net profit

• Change of consumer preference for a competitor’s brand

EVENTS WHICH COULD IMPACT THE STOCK NEGATIVELY

IFS ASSESSMENT: ST STRENGTH


• ST is the Number 1 brand in Singapore

• Telkomsel is Number 1 brand in Indonesia

• Bharti Airtel is Number 1 brand in India and leading brand in Africa

• AIS is Number 1 brand in Thailand

• Optus is the Number 2 brand in Australia

• Globe is Number 2 brand in Philippines

• 4 core action plan:

+ Best Network

+ Better Customer Experience

+ Expand Content Offering

+ New Generation Mobile Services

IFS ASSESSMENT: ST


• BUY due to its leadership position in several countries and sound balance sheet

• India and Indonesia is among the most populous nations in the world. Revenue from these two countries could strengthen further in the future

• Management’s commitment to distribute 60% - 75% of underlying profit as dividend

• Growth in enterprise business as ST moves into providing cloud services, global cyber security service and being a part of Singapore’s drive to become a Smart Nation by providing innovative solutions

• New growth area in providing premium OTT (over-the-top) video service in collaboration with Sony Pictures and Warner Brothers and providing data and analytics services

• Syariah compliant as at 8 October, 2015

MY DISCLOSURE


• I do not own shares of SingPost

• I do not own shares of SingTel

Q & A

All rights reserved by Jupiter Consultancy Sdn Bhd. Any unauthorised copying is deemed an infringement under the Malaysian Copyright Act 1987

HAPPY INVESTING!

THANK YOU

All rights reserved by Jupiter Consultancy Sdn Bhd. Any unauthorised copying is deemed an infringement under the Malaysian Copyright Act 1987

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PC WONG - s3. Slowdown in the global economy which could impact SingPost’s earnings, the Asia Pacific being its core revenue generator