Monday, September 22, 2014

Singapore Post Ltd - Groundwork firmly in place

What Happened 
SingPost hosted a site tour to view its end-to-end suite of ecommerce logistics services. These range from front-end solutions such as website design to back-end services including warehousing and last-mile delivery. 

What We Think
With a full suite of ecommerce logistics solutions, we believe SingPost has laid the groundwork for regional expansion. While most third-party logistics (3PL) providers mainly focus on warehousing and delivery, SingPost’s added services allow it to capture a wider audience, from international brands looking to set up a standalone online retail presence (monobrand channel) to SMEs that want to list their products on an online marketplace (multibrand channel). SingPost views the monobrand segment as a key growth area, given that consumers trust brands’ official websites more than online marketplaces, especially in less ecommerce-ready markets like Indonesia. Moreover, with the exception of website design, the infrastructure and systems needed to run an ecommerce operation for each brand are the same, thus making it highly scalable. As logistics is a volume game, we think that SingPost needs to ramp up order flow to capture efficiency gains and keep its pricing competitive. Order flow is limited by customer acquisitions, which have shown promising signs (doubled from 300 to 600 ecommerce customers as at end-FY14) but still need to expand more rapidly. A potential tie-up with Alibaba could bring in bigger volumes, not only through Alibaba’s expansion into ASEAN, but also a global ecommerce logistics platform that will be made available to third-party users. 

What You Should Do
SingPost’s share price has traded sideways since its run-up in Jun when it announced that Alibaba was taking a stake in SingPost. Even the news of a postage rate hike, which we estimate would lead to 6-7% EPS accretion, barely moved its share price. We believe the next re-rating hinges on the potential JV with Alibaba to set up an international ecommerce logistics platform. M&A opportunities in ecommerce logistics also remain a key catalyst for the stock.

Wednesday, September 03, 2014

Singapore Post Ltd - A little help goes a long way

What Happened 
SingPost will revise domestic and international postage rates with effect from 1 Oct 2014. This marks the first rate hike since 2006. Domestic postage rates will increase by 4-20 S cts while international postage rates will rise by 5-25 S cts. The registered article fee for international mail will also be raised from S$2.20 to S$2.50. To help mitigate the impact of the postage rate increase, SingPost will be giving out 10m free stamps to households and charities and offer a 5% rebate to SME franked mail customers for the first year. 

What We Think
SingPost has been challenged with a 25-32% rise in labour and fuel costs since its last postage rate hike in 2006 and this new rate hike will help SingPost to cope with cost pressures as mail volumes continue to decline. International settlement rates or terminal dues on outbound mail have risen by 43% due to Singapore being re-classified as a “New Target Country” by the Universal Postal Union in 2012. The rate is expected to climb another 37% by 2017, or an estimated S$35m-40m over the next 2-3 years, which we have previously factored into our forecasts. We estimate that the revised postage rates will add S$8m to revenue in 2HFY15 and S$16m (+1.3-1.6%) from FY16 onwards. On the net profit level, the impact will be more pronounced with a 6-7% upgrade to our estimates from FY16 onwards as the price increase should flow through to the bottomline. This is after accounting for the cost of the 10m free stamps in the first year. 

What You Should Do
While this news is a positive, we believe the key potential catalysts for the stock are: 1) M&A opportunities in the e-commerce logistics space, and 2) a JV with Alibaba, which can bring in more e-commerce-related volumes. Our rating remains an Add.

Monday, September 01, 2014

Celebrate OSIM's 35th Anniversary with Lee Min Ho - Meet-and-Greet

Date: 27 September 2014 (Saturday)
Time: 3pm
Venue: Causeway Point

Mark your calendars! Korean superstar and drama prince, Lee Min Ho will be coming to Singapore on 27 September to celebrate OSIM's 35th anniversary! 

The charming star recently starred in the popular drama “The Inheritors”, which drew legions of fans all over the world. Lee Min Ho has set hearts yet a flutter by becoming the latest celebrity endorser for OSIM’s triple enjoyment massage sofa that can transform into a relaxing lounger or a full-body massage chair.