SINGAPORE

SINGAPORE Company
Company Update
Update Results MITA
MITANo.
No. 010/06/2009
010/06/2010

31 January 2011
Maintain Singapore Post Ltd
HOLD Steady 3QFY11 results
Previous Rating: HOLD

Current Price: S$1.17

Fair Value : S$1.16 3QFY11 results in line with expectations. Singapore Post
(SingPost) reported a 6.3% YoY rise in revenue to S$148.5m
and a 0.7% drop in net profit to S$43.8m in 3QFY11, such
that 9MFY11 net profit accounted for 74.7% of our full year
4000
Spore
1.4 estimates and 78.5% of Bloomberg's mean consensus.
3500 Pos t 1.2
Excluding one-off items such as amortization of deferred gain
3000 1.0
2500 STI 0.8 on intellectual property rights and benefits from the Jobs Credit
2000 0.6 Scheme (in 3QFY10), underlying net profit increased 5.1%
1500 0.4
YoY to S$40.9m.
1000 0.2
May-08

May-09

May-10
Jan-08

Sep-08

Jan-09

Sep-09

Jan-10

Sep-10

Growth in mail and logistics businesses. Mail revenue grew

7.5% YoY on the back of strong growth in the direct mail
business and better economic conditions, while international
mail was underpinned by growth in e-commerce activities. More
transshipment and vPOST shipping activities contributed to
the 10.2% YoY increase in logistics revenue, but operating
profit from this division declined as transshipment generally
Reuters Code SPOS.SI has lower margins.
ISIN Code S08
Diversifying its businesses and markets. Management
Bloomberg Code SPOST SP
reiterated that it continues to face "formidable challenges" in
Issued Capital (m) 1,930 the postal industry, driven by factors such as e-substitution.
Mkt Cap (S$m/US$m) 2,258 / 1,756 With the global trend of declining mail volumes, the group
Major Shareholders wants to reduce its reliance on mail revenue and diversify its
Sing Tel 25.6%
revenue base. Indeed, the mail division's contribution to total
revenue has fallen steadily from 77% in FY08 to 68% in
Free Float (%) 73.8% 9MFY11. However, being Singapore's dominant postal operator,
Daily Vol 3-mth (‘000) 3,288 SingPost will still focus on the mail business to meet the
52 Wk Range 1.010 - 1.250 changing and growing needs of its customers, while expanding
its logistics and retail divisions. The group is also exploring
acquisition opportunities to grow its businesses in the region.

(S$ m) FY09 FY10 FY11F FY12F

Maintain HOLD. To accelerate the group's transformation and
Revenue 481.1 525.5 561.1 578.4 growth, SingPost has announced an organizational
EBITDA 205.0 213.0 225.5 228.5 restructuring in which there will be a CEO in charge of Postal
P/NTA (x) 9.0 11.1 9.1 7.7 and Corporate Services while another CEO will focus on the
EPS (cts) 7.7 8.6 8.6 8.9 international business. We are positive on this latest
PER (x) 15.1 13.7 13.6 13.1
development as the segregation of duties should result in a
sharper focus on both the mail business (faces own challenges
in the industry) and the group's international expansion efforts
(essential to seek new growth drivers). Meanwhile, we continue
to await news on the M&A front. An interim dividend of
Low Pei Han S$0.0125/share has been declared, in line with the group's
(65) 6531 9813 usual practice. Though the stock has an estimated dividend
e-mail: LowPH@ocbc-research.com yield of 5.3%, there is limited upside potential to our DCF-
based fair value estimate of S$1.16. Hence we maintain our
HOLD rating.

Please refer to the important disclosures at the back of this document.

Singapore Post Ltd

SingPost's Key Financial Data

SingPost Results 3Q11 3Q10 % Chg 2Q11 % Chg
Year Ended 31 Mar (S$ m) (S$m) (S$m) (YoY) (S$m) (QoQ)

Revenue 148.5 139.6 6.3% 137.6 7.9%

EBITDA 48.7 48.3 0.7% 44.3 9.8%
Depreciation & amortisation -7.2 -7.0 3.1% -7.3 -0.8%
Net interest expense -2.7 -1.8 47.7% -3.0 -11.9%
Associates -0.2 -0.3 -49.1% -0.1 47.8%
Others 15.5 13.8 12.8% 14.6 6.0%
Pre-tax profit 53.3 52.9 0.7% 48.0 11.1%
Tax -9.4 -8.6 9.5% -8.3 12.8%
Minority interests -0.1 -0.2 -52.6% -0.2 -42.7%
Net profit att to shareholders 43.8 44.1 -0.7% 39.5 11.0%

SingPost's Key Financial Data

EARNINGS FORECAST BALANCE SHEET

Year Ended 31 Mar (S$m) FY09 FY10 FY11F FY12F As at 31 Mar (S$m) FY09 FY10 FY11F FY12F

Revenue 481.1 525.5 561.1 578.4 Cash and cash equivalents 139.5 390.2 409.8 464.4
Operating expenses -309.5 -352.9 -377.1 -393.3 Other current assets 75.7 94.9 101.7 104.8
EBITDA 205.0 213.0 225.5 228.5 Property, plant, and equipment 457.3 450.3 443.9 434.4
EBIT 178.6 183.2 199.2 202.9 Total assets 770.2 1,074.9 1,104.9 1,144.1
Net interest expense -7.2 -7.5 -11.8 -11.4 Debt 303.0 503.0 503.0 503.0
Associates 7.8 1.0 0.2 1.0 Current liabilities excluding debt 194.4 241.2 230.6 236.7
Pre-tax profit 179.1 194.8 195.7 200.6 Total liabilities 514.0 776.4 760.4 762.1
Tax -29.6 -29.0 -29.2 -28.1 Shareholders equity 251.4 292.9 338.4 375.4
Minority interests -0.7 -0.8 -0.5 -0.5 Total equity 256.2 298.5 344.5 382.0
Net profit att to shareholders 148.8 165.0 166.0 172.0 Total equity and liabilities 770.2 1,074.9 1,104.9 1,144.1

CASH FLOW
Year Ended 31 Mar (S$m) FY09 FY10 FY11F FY12F KEY RATES & RATIOS FY09 FY10 FY11F FY12F

Op profit before working cap. chang 205.5 223.0 224.3 237.3 EPS (S cents) 7.7 8.6 8.6 8.9
Working cap, taxes and int -35.2 -14.5 -38.5 -22.7 NTA per share (cents) 13.0 10.6 12.9 15.2
Net cash from operations 170.3 208.5 185.8 214.6 EBITDA margin (%) 42.6 40.5 40.2 39.5
Purchase of PP&E -14.5 -12.4 -15.0 -14.6 Net profit margin (%) 30.9 31.4 29.6 29.7
Other investing flows 6.6 -17.2 -16.0 4.2 PER (x) 15.1 13.7 13.6 13.1
Investing cash flow -7.8 -29.6 -31.0 -10.3 Price/NTA (x) 9.0 11.1 9.1 7.7
Financing cash flow -127.1 71.8 -135.2 -149.7 EV/EBITDA (x) 11.8 11.1 10.4 10.0
Net cash flow 35.4 250.7 19.6 54.6 Dividend yield (%) 5.3 5.3 5.3 5.3
Cash at beginning of year 104.1 139.5 390.2 409.8 ROE (%) 59.2 56.3 49.1 45.8
Cash at end of year (incl ODs) 139.5 390.2 409.8 464.4 Net gearing (%) 0.6 0.4 0.3 0.1

Source: Company data, OIR estimates

Page 2 31 January 2011

Singapore Post Ltd

SHAREHOLDING DECLARATION:
The analyst’s immediate family owns shares in the above security.

RATINGS AND RECOMMENDATIONS:

OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and trading
oriented.
- However, OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month
investment horizon. OIR’s Buy = More than 10% upside from the current price; Hold = Trade within +/-10%
from the current price; Sell = More than 10% downside from the current price.
- For companies with less than S$150m market capitalization, OIR’s Buy = More than 30% upside from the
current price; Hold = Trade within +/- 30% from the current price; Sell = More than 30% downside from the
current price.
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Carmen Lee
Published by OCBC Investment Research Pte Ltd Head of Research

Page 3 31 January 2011