SINGAPORE (Dec 30): UOB Kay Hian is maintaining its “hold” on Singapore Post with SOTP-based target price of $1.76 following the appointment of a new CEO.
“In our view, this is marginally positive as it removes the uncertainty over the resignation of its previous group CEO in December 2015,” says UOB.
(See: SingPost appoints Paul Coutts as new Group CEO)
However, the research house sees the possibility of a “kitchen sink” writedown of slow performing assets in SingPost’s upcoming March year-end results.
In addition, near-term growth could be crimped by high volume-related expenses as utilisation is not maximised on its new regional eCommerce Logistics Hub at Tampines.
“Nevertheless, we see the potential for higher free cashflow as capex is likely to peak in FY18F (year to March) and improving corporate governance and disclosure as a compelling proposition,” says UOB.
After the market closed on Thursday night, SingPost announced the appointment of a new group CEO Paul Coutts with effect from June 1.
Coutts joins SingPost from Toll Global Forwarding, one of the five divisions in the Toll Group, where he was CEO since February 2013 in a global role based in Singapore.
He has more than 20 years of experience in C-suite positions at major global logistics and postal companies.
UOB says the new CEO's seniority as well as experience in logistics and postal businesses is also a positive.
“We do not expect any major shifts in direction nor strategy as we think the medium-term focus would be on integrating the group’s various segments and newly acquired businesses as a result of SingPost's transformation,” says UOB.
As at 11.00am, shares of SingPost are trading at $1.47.
