SINGAPORE Company

SINGAPORE CompanyUpdate
Update Results MITA
MITANo.
No. 010/06/2009
010/06/2009

9 April 2010
Maintain Singapore Post Ltd
BUY Growth rate depends on investment decisions
Previous Rating: BUY

Current Price: S$1.06 Historical analysis. Charting Singapore Post's (SingPost)

Fair Value: S$1.16 share price against the STI reveals that the ratio is currently
below its historical average ever since SingPost's IPO in 2003
(Exhibit 1). If one were to hold the view that most of the easy
money has been made in the high beta stocks during the
4000 1.2
3500
Spore
Pos t 1.0
stock market rebound since Mar 09, it is then likely that this
3000
0.8 ratio may stay stable or even rise (i.e. limited downside). We
2500 STI
2000
0.6 also did a peer comparison and found that SingPost has
1500 0.4 generally outperformed some of its peers in terms of returns
1000 0.2
over a five-year period, excluding dividends (Exhibit 2). As the
Apr-08

Apr-09
Jan-08

Jul-08

Oct-08

Jan-09

Jul-09

Oct-09

Jan-10

group proceeds with its regional expansion plans and seeks

to diversify its businesses, the stock should continue to
perform well, assuming no major hiccups.

Nature of business both a boon and bane. SingPost's

resilient earnings and stable operating cash flows mean that
it can weather downturns with ease, and lack of financing
Reuters Code SPOS.SI
should not be a problem with regards to its expansion plans.
ISIN Code S08
Besides a cash pile of S$149m as at Dec 09, the group also
Bloomberg Code SPOST SP recently issued S$200m worth of notes that seems well priced
Issued Capital (m) 1,927 amidst a 3x oversubscription rate (refer to earlier report 24
Mkt Cap (S$m/US$m) 2,042 / 1,465 Mar 2010). The onus is on management to avoid over-paying
Major Shareholders for acquisitions and to make good investment decisions,
Sing Tel 25.7% especially since there is a need to seek new business drivers
Free Float (%) 74.2%
to sustain growth as the domestic postal industry has limited
growth prospects.
Daily Vol 3-mth (‘000) 3,446
52 Wk Range 0,755 - 1.100
Industry updates. The stock price of Pos Malaysia [NOT
RATED] surged to a 32-month high yesterday after newswires
reported that Nationwide Express Courier Service Bhd may
be interested in bidding for a stake in the postal company.
Pos Malaysia also said it will double the price of postage
(S$ m) FY08 FY09 FY10F FY11F
stamps for standard mail weighing up to 20g to 60 sen starting
Revenue 472.6 481.1 518.3 526.9
1 Jul 2010. Developments should be monitored for insights
EBITDA 198.2 205.0 207.7 217.7
regarding the value of Pos Malaysia.
P/NTA (x) 9.1 8.1 10.1 8.3
EPS (cts) 7.8 7.7 8.2 8.5
Maintain BUY. The future of SingPost over the long term hinges
PER (x) 13.6 13.7 12.9 12.4
heavily on its ability to make astute investment decisions as
it seeks new business opportunities. Meanwhile, we also like
the group's enthusiasm in pursuing new initiatives in the areas
of innovation, social responsibility and its attempts to stay
Low Pei Han
(65) 6531 9813 relevant in today's fast changing world. With a total upside
e-mail: LowPH@ocbc-research.com potential of about 15% (including dividend of 5.9%), we
maintain our BUY rating with a fair value estimate of S$1.16.

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

Singapore Post Ltd

Exhibit 1: Historical SingPost/STI ratio

0.0006 1.4

0.00055
1.2

1
0.0005

SingPost price (S$)

0.8

Ratio (x)
0.00045
0.6
Average: 0.0004
0.0004
0.4

0.00035
0.2
SingPost/STI SingPost
0.0003 0
May 03

May 05

May 07

May 09
May 04

May 06

May 08
Nov 03

Nov 04

Nov 05

Nov 06

Nov 07

Nov 08

Nov 09
Source: Bloomberg, OIR

Exhibit 2: SingPost and comparables

100

80

60

40
% return

20

-20
SingPost
-40
Pos Malaysia
-60 Deutsche Post
UPS
-80
Apr 05

Aug 05

Dec 05

Apr 06

Aug 06

Dec 06

Apr 07

Aug 07

Dec 07

Apr 08

Aug 08

Dec 08

Apr 09

Aug 09

Dec 09

Apr 10

Source: Bloomberg, OIR

Page 2 9 April 2010

Singapore Post Ltd

SingPost's Key Financial Data

EARNINGS FORECAST BALANCE SHEET

Year Ended 31 Mar (S$m) FY08 FY09 FY10F FY11F As at 31 Mar (S$m) FY08 FY09 FY10F FY11F

Revenue 472.6 481.1 518.3 526.9 Cash and cash equivalents 104.1 139.5 203.2 252.0
Operating expenses -298.3 -309.5 -345.0 -345.6 Other current assets 77.8 75.7 91.3 90.8
EBITDA 198.2 205.0 207.7 217.7 Property, plant, and equipment 470.8 457.3 449.1 437.9
EBIT 171.9 178.6 182.4 193.1 Total assets 747.4 770.2 841.0 878.2
Net interest expense -8.1 -7.2 -7.4 -7.1 Debt 302.1 303.0 303.0 303.0
Associates 8.2 7.8 1.8 1.8 Current liabilities excluding debt 201.9 194.4 211.5 214.5
Pre-tax profit 175.5 179.1 184.0 192.0 Total liabilities 521.8 514.0 548.5 540.9
Tax -25.8 -29.6 -25.8 -26.9 Shareholders equity 221.4 251.4 287.1 331.4
Minority interests -0.5 -0.7 -0.5 -0.5 Total equity 225.6 256.2 292.5 337.2
Net profit att to shareholders 149.3 148.8 157.8 164.7 Total equity and liabilities 747.4 770.2 841.0 878.2

CASH FLOW
Year Ended 31 Mar (S$m) FY08 FY09 FY10F FY11F KEY RATES & RATIOS FY08 FY09 FY10F FY11F

Op profit before working cap. changes 200.5 205.5 215.8 222.7 EPS (S cents) 7.8 7.7 8.2 8.5
Working cap, taxes and int -26.8 -35.2 -5.3 -32.2 NTA per share (cents) 11.6 13.0 10.5 12.8
Net cash from operations 173.7 170.3 210.5 190.5 EBITDA margin (%) 41.9 42.6 40.1 41.3
Purchase of PP&E -12.8 -14.5 -13.4 -14.1 Net profit margin (%) 31.6 30.9 30.4 31.3
Other investing flows 18.1 6.6 -6.3 1.7 PER (x) 13.6 13.7 12.9 12.4
Investing cash flow 5.3 -7.8 -19.7 -12.4 Price/NTA (x) 9.1 8.1 10.1 8.3
Financing cash flow -143.8 -127.1 -127.2 -129.2 EV/EBITDA (x) 11.3 10.8 10.3 9.6
Net cash flow 35.2 35.4 63.6 48.9 Dividend yield (%) 5.9 5.9 5.9 5.9
Cash at beginning of year 69.0 104.1 139.5 203.2 ROE (%) 67.4 59.2 55.0 49.7
Cash at end of year (incl ODs) 104.1 139.5 203.2 252.0 Net gearing (%) 0.9 0.6 0.3 0.2

Source: Company data, OIR estimates

Page 3 9 April 2010

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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Page 4 9 April 2010