UOB Kay Hian analyst Llelleythan Tan has upgraded Singapore Post (SingPost) to “buy” from “hold” after the postal company reported robust results for the 3QFY2021 ended December.
On Feb 25, SingPost saw an operating profit of $38 million for the 3QFY2021 driven by e-commerce. According to Tan, the results stood in line with his expectations.
To that end, Tan has upped his target price on SingPost to 78 cents from 75 cents previously, which values the mail business at an FY2022 P/E of 12x (from 10x previously). The new target price also values SingPost’s logistics business at an FY2022 EV/EBITDA of 8.0x, in line with the peer average; and property at a cap rate of 5%.
While Tan has kept his earnings estimates unchanged on SingPost, he sees the group being on the verge of a “strong recovery” due to the growth in e-commerce.
The way he sees it, “e-commerce in both domestic and overseas markets has outperformed and is expected to continue for 4QFY2022 and beyond”.
“Also, with the return of international flights into Singapore, air freight rates are expected to moderate as flight capacity increases. Once air freight rates reach an optimal level sometime in 1HFY2023, we expect SingPost to ramp up international post and parcel (IPP) volumes, helping boost overall revenue,” he writes.
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“Therefore, with an expected inflection point approaching and trading at slightly above -1 standard deviation of its five-year mean P/E, we opine that SingPost has significant potential upside at current attractive price levels,” he adds.
As at 4.52pm, shares in SingPost are trading 1 cent higher or 1.54% up at 66 cents, or an FY2022 P/B of 1.1x and dividend yield of 3.9%.
See CGS-CIMB's take on the counter here.
