SingPost's 1HFY2025 earnings nearly doubled but fell short of some analysts' expectations. Pending details of a long-planned "strategic review" of its Australia-based businesses, analysts from OCBC Investment Research and UOB Kay Hian have maintained their respective calls and target prices for now.
For the half year ended Sept 30, SingPost reported core Patmi of $25.2 million that's up 87.6% over the year-earlier period. However, no thanks to higher-than-expected interest costs, this figure was short of what UOB Kay Hian analyst Llelleythan Tan Yi Rong was projecting.
The higher financing costs somewhat offset operational improvements enjoyed by SingPost in its domestic operations, thanks to higher postage rates allowed by the government.
Its Australia logistics subsidiaries enjoyed a lift too from the consolidation of recently acquired businesses. However, Tan observes some weaknesses in its third-party logistics segment.
With higher interest cost assumptions, Tan has cut his FY2025 earnings estimate by 13% and FY2027's by 15%.
However, citing his sum-of-the-parts valuation methodology, Tan points out that SingPost at current levels remains "severely" undervalued.
See also: UOBKH calls Centurion Corp a stock for ‘growth-minded investors’
For one, its property segment alone is valued at $844 million, versus SingPost's current market value of around $1.18 billion.
Tan values SingPost's logistics and postal segments at $861.3 million and $271.2 million respectively.
As such, Tan in his Nov 7 note, is keeping his "buy" call and 61 cents target price.
See also: With 300MW wind-solar project win in India, Sembcorp at 64% of 2028 renewable energy goal: CGSI
In her Nov 6 note, OCBC Investment Research's Ada Lim points out that SingPost's share price has rallied throughout October following reports from Australia that there are interested buyers for its assets Down Under.
However, no deals have been firmed up thus far and that the company's "strategic review" of its Australia businesses, announced earlier this year, is still ongoing.
"An update on the outcome is expected by the end of the calendar year, and proceeds from any divestments may potentially be used to pare down Australian dollar debt," says Lim, who has kept her 'hold' call and 58 cents fair value on the counter.
For Ong Khang Chuen of CGS International, he is anticipating two key decisions to be made by the end of the current FY2025 ending March 2025.
First, the sale of SingPost's of freight forwarding business, and next, an assessment of sale options for its Australian assets.
He estimates the combined value of both businesses to be around $1.1 billion, using an 8x 2025 EV/EBITDA multiple.
In his Nov 6 note, Ong reiterates his "add" call on the stock, citing how there is $2.5 billion worth of assets that can be unlocked in the coming three years as the company embarks on its strategic transformation.
For more stories about where money flows, click here for Capital Section
However, he has trimmed his target price to 58 cents from 60 cents, citing lower margin assumptions.
For Ong, potential re-rating catalysts include the successful execution of value-unlocking plans.
On the other hand, downside risks include prolonged weakness in its international business volumes and forex translation impact from a weaker Australian dollar and the RMB versus Singdollar, the reporting currency.
As at 10.58 am, SingPost changed hands at 50.5 cents, down 2.88%.
