SINGAPORE (March 27): Maybank Kim Eng Research is maintaining its “hold” call on Singapore Post (SingPost) at an unchanged target price of $1.34 given major decisions within the group are likely to be put on hold until new CEO, Paul Coutts officially joins in June.
Maybank recently held its Invest ASEAN Singapore Conference, where SingPost was hosted and discussed its future plans as well as current relationship and potential collaborations with its China’s Alibaba Group.
In a Sunday report, Maybank analyst John Cheong recalls how SingPost says it intends to offer a more “extensive hybrid solution” to its clients that will enable selection between postal or commercial services across different markets.
“Management are also mindful of rising competition from postal players in neighbouring countries and a tendency by customers to rely on services of lower costs countries. A good example is the recent plan of Alibaba to set up its regional e-commerce hub in Malaysia,” says Cheong.
(See also: Alibaba to set up regional e-commerce hub in M’sia)
In Cheong’s view, SingPost’s relationship with Alibaba remains positive as well, given plans for more collaboration between the two parties after the latter’s recent capital injection.
The analyst is also is positive on the outlook SingPost’s loss-making US e-commerce business Trade Global under the charge of its new CEO, Paul Demirdjian, whom he says has “a good track record in building up Jagged Peak and running an asset-light business model”.
“Possible improvements for Trade Global include more automation to reduce reliance on labour and charging discriminatory pricing to customers based on seasonality and volume. The amount of asset impairment will likely be determined in 4Q17 results,” he concludes.
As at 10.54am, shares of SingPost are trading 0.4% lower at $1.31.
