SingPost Investment in Postea Inc.

SingPost announced today that it will acquire a 30% stake in Postea Inc., a postal and logistics technology company, incorporated in Delaware, USA. The total consideration is US$33.7m, comprising US$9.4m cash payment, and non-cash consideration of US$24.3m for the licensing of SingPost’s intellectual property rights to Postea. This would include IP rights in its Self-service Automated Machine (SAM), SAMplus, POST21 and vPOST systems.

Postea was founded in 2007 and specialises in providing automation technology solutions for the postal, courier and logistics markets, such as automated parcel processing systems. Its subsidiary Innovations Group is currently the contractor for the US Postal Service providing mailing systems to Contract Postal Units across the country. We believe Postea is not immediately earnings accretive.

The transaction recognizes SingPost’s postal technology IP rights as intangible assets, which we believe will result in an extraordinary gain for FY10 of cUS$24m. More importantly, we believe Postea will serve as the platform for SingPost to “productise”, further develop, and leverage its internal postal technologies going forward.

Our price target of S$0.96 is derived from DCF assuming 9.5% COE and 3% terminal growth. At our price target the implied FY10 yield is 5.8%.

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