What if Jarick's call hits the mark? Analyst's case for staying patient with this stock

THE CONTEXT

• At Maybank Kim Eng, Jarick Seet is head of small-mid caps. He has put out, notably, 6 reports in the past 3 months on SingPost.

That's way more than any other covering analyst.

In that period, SingPost has attracted investor attention in multiple ways, embarking on a strategic review and making moves to sell large assets -- and firing its CEO and CFO.

• Jarick has considered the boardroom drama and all, and stuck to his "buy" call on the stock.

What if he is proven right? Then there's an attractive gain from here.

The stock currently trades way below his target price and a special dividend of "around SGD0.12-0.15/share" is what he expects to be around the corner. It may even be 17-20 cents/share.

"We expect the bulk of the sale proceeds (from SingPost's Australian business) to be distributed to shareholders as special dividends as part of its FY25 results in May," he wrote in a new note on 13 Feb.

• CGS International and UOB Kayhian have similar target prices: 74 cents and 72 cents, respectively.

• However, OCBC Investment Research's Dec 2024 report is more tempered, with a fair value estimate of 54 cents for now.

OCBC said: "Given that Australia had been a significant growth driver for SPOST in recent years, we maintain our HOLD rating while awaiting further clarity on its next engine of growth, backed by a stronger balance sheet and greater financial flexibility."

• What if Jarick is wrong about the dividends in May? What are the company fundamentals that make it still worth holding?

Read more below ....

Excerpts from Maybank KE's report
Analyst: Jarick Seet

SingPost
Patience to be rewarded

Rainbow after the rain

After the parcel gate saga, we believe the situation has stabilised with the hiring of the new COO and CFO.

The company has also reiterated its unchanged strategy which is to divest non-core assets and to return value to shareholders.

We are awaiting the circular for the EGM to approve the sale of the Australian business followed by approval from the Australian government as well as the sale of Famous Holdings.

All in all, we expect the bulk of the sale proceeds to be distributed to shareholders as special dividends as part of its FY25 results in May.

As a result, we believe patience will be rewarded and maintain BUY with an unchanged TP of SGD0.77.

Significant special dividends highly likely

After paring down its Australia debt and coupled with the potential sale of Famous Holdings, we expect around SGD400-450m excess sales proceeds could be distributed as special dividends to shareholders.

SingPost
Share price: 56 c	Target: 77 c

As of 30 Sep 2024, SingPost still holds about SGD428m of cash, hence we believe it will not need to keep so much cash from the sales proceeds on its balance sheet.

This works out to be around SGD0.17-0.20/share for potential special dividends.

Even without Famous, we expect the distribution to be around SGD0.12-0.15/share.

SingPostCentre 1.25 Waiting to be sold: SingPost Centre in Eunos Road, a prominent mixed-use development valued at S$1.1 billion.

Value Proposition
 SingPost is the 4th-largest logistics player in Australia.
 Significantly undervalued with net assets worth an estimated SGD0.90/share.
 Profitability and dividends likely to surge in next few years.
 Asset monetisation will return significant value to shareholders.
 Beneficiary of higher e-commerce volume.

Singapore business will need more right-sizing

We believe that the local postage business will likely still experience a drop in volume and more right-sizing of costs and outlets will likely be needed.

We also expect postal rates to be raised down the road amid declines in volumes and users.

Ship stabilising, be patient

We believe the ship has been stabilised with top management being replaced.

While we expect its international business and its local Singapore business to continue to face challenges, the key for us would still be the asset monetisation angle with special dividends.

We believe shareholders should remain patient while awaiting closure of the Australian business sale and potential further asset sales.

Eventually rewards should come in the form of special dividends.

Full report here.

See also: SINGPOST: Ignore The Noise, say analysts. Special Dividends Loom as This Company Monetises Non-Core Assets

What if Jarick's call hits the mark? Analyst's case for staying patient with this stock

You may also be interested in: