• Investor interest in SingPost is staying high as the company progresses towards a strategic reshaping of its business. Investors took a shine to its stock after it appointed Merrill Lynch in June 2024 (see chart) as financial advisor to look into options for its Australia business specifically. • In a surprise announcement on 2 Dec 2024, it said it will sell its Australian business to Pacific Equity Partners for an enterprise value of AUD1.02 billion, resulting in a gain on disposal of SGD312.1 million. It will use the proceeds to pay down its AUD-denominated debt and potentially dish out a special dividend.  SingPost Centre in Eunos Road, a prominent mixed-use development valued at S$1.1 billion, is likely to be sold.• "In our view, this transaction was a surprise given that we expected a strategic minority stake sale versus a complete sale of the Australian business, given that this segment was the group’s only significant growth driver," says UOB Kay Hian analyst Adrian Loh. |
We compare what three analyst reports from UOB KH, OCBC and Maybank have to say ....
|
Recent stock price: 58 cents
|
Analyst |
Target Price |
Upside |
Rating |
|
OCBC |
SGD 0.58 |
-- |
HOLD |
|
UOB Kay Hian |
SGD 0.72 |
+24.1% |
BUY |
|
Maybank |
SGD 0.77 |
+32.8% |
BUY |
| Key Differences |
- Valuation and Target Price:
- OCBC maintains a fair value estimate of SGD 0.58, focusing on the need for further strategic clarity post-divestment.
- UOB Kay Hian is more optimistic with a target price of SGD 0.72, reflecting confidence in future growth and asset monetization.
"Despite the recent run-up in share price performance, we reckon that there is still potential upside at current price levels, given that the group has yet to monetise both Famous Holdings and the SingPost Centre which could further unlock shareholder value.
"Also, further clarity on the group’s strategy moving forward would be a re-rating catalyst for the stock, in our view. Our target price implies a 1.0x FY26F PB. " - Maybank is the most optimistic with a target price of SGD 0.77, citing significant potential for shareholder returns through dividends and asset sales.
"We believe that excess cash will be returned to shareholders and we expect more asset sales going forward like Famous Holdings, SingPost centre and its post offices after discussions with local authorities."
Maybank estimates SingPost could unlock value up to SGD 0.86/share.
- OCBC maintains a fair value estimate of SGD 0.58, focusing on the need for further strategic clarity post-divestment.
| Evolution of Australia business |
| "The acquisition of multiple logistics players and their consolidation into an integrated platform have allowed SPOST to become one of the top five logistics providers in Australia. The Australia business was therefore seen as a significant growth driver for SPOST, and we note that it contributed to 57.9% (SGD574.9m) of overall group revenue in 1HFY25." -- OCBC Investment Research |
Future Growth Outlook:
- OCBC expresses caution regarding growth drivers post-divestment, highlighting risks such as competition and e-commerce demand slowdown.
"We await further clarity on SingPost's next engine of growth, backed by a stronger balance sheet and greater financial flexibility." - UOB Kay Hian expects limited growth without the Australian business but sees potential in future M&A activities.
"The group plans to use cash proceeds to deleverage its balance sheet which would result in significant interest cost savings and turn the group into a net cash position." - Maybank is optimistic about future profitability and dividends, expecting continued asset sales to unlock value.
"We believe that majority of the proceeds will likely be returned as dividends to shareholders. With a key risk mitigated, we reduce the holding company discount on our SOTP valuation."
Full reports: UOB KH, Maybank KE.