UOB Kay Hian analyst Llelleythan Tan Yi Rong has maintained his “buy” call on Singapore Post (SingPost) at an unchanged target price of $0.72.
Despite the changes in management, the sale of SingPost’s Australian business remains on track and is scheduled for an extraordinary general meeting on Feb 25.
Announced last December, Pacific Equity Partners shall acquire SingPost's Australian business at an enterprise value of A$1.02 billion ($897 million). This translates to A$776 million in cash and an anticipated one-time disposal gain of about $312 million for SingPost.
SingPost plans to use roughly half of the cash proceeds to repay its Australian dollar-denominated debt of A$362 million. It may consider declaring a special dividend in due course, after accounting for future funding needs.
“We opine that the group would prioritise future growth opportunities/deleverage its balance over a large special dividend. Using $100 million of the remaining $362 million cash proceeds would result in a special dividend of around 4.4 cents/share and a dividend yield of 8%. Our base case assumes that SingPost maintains its FY2026-FY2027 dividends at the same level as FY20 25’s via special dividends,” says Tan.
He also expects SingPost to press ahead with divesting its non-core assets and businesses even though the timeline and schedule of future sales may be impacted as the new management executives take over.
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Famous Holdings is expected to be the next non-core asset to be divested in the short to medium term, with an estimated valuation of about $130 million based on a 5x EV/EBITDA multiple, according to Tan.
He also values the SingPost Centre at nearly $900 million, noting that any sale would likely involve a minority stake rather than a full divestment.
As at 11 am, shares in SingPost are trading flat at $0.54.
