Introduction
Singapore Post Ltd (SPOST), the national postal service provider of Singapore, has been under the spotlight recently due to significant management changes. Despite the noise, the company remains on track with its strategic divestments, positioning itself for future growth. UOB Kay Hian retains a BUY recommendation for SPOST, maintaining a target price of S\$0.72, which represents a potential upside of 32.1% from its current share price of S\$0.545. This article dives deep into the company’s financials, strategic maneuvers, and upcoming catalysts.
Key Financial Data and Stock Performance
SPOST is categorized under the Industrials sector and is listed with the Bloomberg ticker SPOST SP. It has issued 2,250 million shares, with a market capitalization of S\$1,226.3 million (US\$897.2 million). Over the past year, its stock has shown resilience, with a 52-week high/low of S\$0.60/S\$0.37 and a year-to-date performance of 2.8%.
Significant shareholders include Singtel (22.0%) and Alibaba Group (14.6%). With a FY25 NAV/share of S\$0.63 and a net debt/share of S\$0.25, SPOST’s financial position remains stable.
Recent Developments: Whistleblower Report and Management Changes
Following whistleblower reports and internal investigations, SPOST terminated three senior executives, including the Group CEO, Group CFO, and the CEO of its International Business Unit (IBU). These terminations were linked to negligence during the handling of internal investigations and misrepresentations to the audit committee. Despite not being directly involved in the operational misconduct, their actions compromised decision-making and led to a loss of board confidence.
The incident involved unauthorized updates to “delivery failure” status codes for parcels to avoid contractual penalties, with no delivery attempts made. Post-investigation, the contract with the affected customer was renewed after penalties were paid.
Leadership Succession Plan
To ensure continuity, SPOST has announced new leadership appointments. The CFO of SPOST’s Australia business will assume the GCFO role in Singapore. Additionally, the ex-Singapore CEO will take up a newly created Group COO role, while the current head of SPOST’s South District IBU will act as the interim CEO of the International Business Unit. Board Chairman Simon Israel will provide increased oversight during this transitional phase.
Strategic Divestments: Australian Business Sale
Despite the management upheaval, SPOST’s divestment strategy remains intact. The sale of its Australian business to Pacific Equity Partners (PEP) is progressing smoothly, with an extraordinary general meeting scheduled for February 2025. The deal, valued at an enterprise value of A\$1.02 billion (~S\$897 million), is expected to yield A\$776 million (~S\$683 million) in cash for SPOST and a one-off gain of approximately S\$312 million.
Half of the proceeds (A\$362 million) will be used to repay Australian dollar-denominated debt. The remaining funds may be allocated for growth opportunities, balance sheet deleveraging, or a special dividend. A full special dividend could amount to 16 S cents/share, translating to a dividend yield of 27%. However, a more conservative scenario involving S\$100 million from the proceeds would yield a special dividend of 4.4 S cents/share (8% dividend yield).
Future Divestments: Famous Holdings and SingPost Centre
SPOST is expected to continue monetizing non-core assets. The next likely candidate is Famous Holdings, which could be valued at approximately S\$130 million (based on a 5x EV/EBITDA multiple). The SingPost Centre, valued at around S\$900 million, may also see a partial minority stake sale. However, the timeline for these divestments could be impacted as the new management team settles in.
Financial Performance and Outlook
SPOST’s financials for FY25-27 reflect a stable outlook, with core PATMI estimates maintained. Key metrics include:
- FY25 Net Turnover: S\$2,033 million
- FY25 EBITDA: S\$189 million
- FY25 Net Profit (Adjusted): S\$62 million
- FY25 EPS: 2.7 S cents
- FY25 Dividend Yield: 2.0%
- Debt to Equity: 20.9%
- Net Debt to Equity: -33.7% (indicating a net cash position)
Valuation and Recommendation
UOB Kay Hian reiterates a BUY recommendation for SPOST, with a target price of S\$0.72 based on a sum-of-the-parts (SOTP) valuation. This implies a 1.0x FY26F P/B multiple. The valuation breakdown is as follows:
- Mail Business: S\$248 million (S\$0.11/share)
- Logistics: S\$131.7 million (S\$0.06/share)
- 4PX: S\$83.7 million (S\$0.04/share)
- Property: S\$914.3 million (S\$0.41/share, based on a 5% cap rate)
The analyst highlights potential upside from divestments of non-core assets, larger-than-expected special dividends, and earnings-accretive acquisitions as key catalysts for a re-rating of the stock.
Conclusion
Despite recent turbulence in its leadership, Singapore Post Ltd remains a compelling investment opportunity. Its focus on divestments, strong financials, and potential for shareholder value creation make it a stock to watch. Investors should keep an eye on upcoming catalysts, including the Australian business sale and potential special dividends, as these developments could unlock significant value.
