Ada Lim of OCBC Investment Research has kept her "hold" call and 58 cents fair value on Singapore Post S08 , following its divestment of an Australia-based unit that will see it book a gain of some $312.1 million.
SingPost, in its Dec 2 pre-market announcement, said it plans to sell Freight Management Holdings for an enterprise value of A$1.02 billion, or $897.6 million.
SingPost plans to use proceeds from the divestment to pare down Australian dollar-denominated debt which stood at A$614.8 million as at Sept 30.
In her Dec 2 note, Lim points out that SingPost's 1HFY2025 earnings ended September missed her projections due to higher-than-expected financing costs that surged 6.1% y-o-y.
"Meaningful deleveraging will enhance the group’s financial position and flexibility, and bring about financial cost savings," adds Lim.
SingPost may give part of the proceeds to shareholders in the form of a special dividend too.
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Nonetheless, given that this divestment is part of a wider strategic review, Lim prefers to maintain her 'hold' all and fair value for now.
"Management was reticent about the strategic growth path for the company post-divestment, only sharing that it will look to review and reset its strategy after the transaction, and to provide an update to the market in due course," says Lim.
"We await further clarity on SingPost's next engine of growth, backed by a stronger balance sheet and greater financial flexibility. Pending this as well as the necessary approvals for the divestment to proceed, we leave our forecasts intact and reiterate our FV estimate of 58 cents," she adds.
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Despite news of this divestment, SingPost shares closed Dec 2 at 59 cents, up just 0.86% for the day, but 24.47% year to date.
