4Q09 revenue fell 2.9% yoy, reflecting the impact of the economic contraction. As expected, the retail and mail businesses were the most affected, down 7.7% and 2% respectively, with the latter hit by a slump in international mail (-6.7% yoy). However, operating costs fell by a faster 6.3% to offset the decline in revenue. Even after grossing back $2.3m in Budget savings, operating costs still fell faster than revenue (-3.8%).
SingPost also declared a final dividend of 2.5 cents, bringing total annual dividend to 6.25 cents, the same as FY08, as cashflow was maintained despite the economic contraction that has resulted in SingPost tightening up financial measures such as raising provision for doubtful debt.
SingPost recently announced it has increased its stake in G3AP, an associate company that provides cross-border mail services within Asia Pacific with a 10-country network, from 50% to 100%. Following the consolidation, G3AP will increase its mail services to include SingPost’s other competencies, such as logistics, warehousing, fulfilment, etc. Although a small move at this stage (costing only $15m), we believe SingPost is likely to speed up its regional agenda given the downturn.
Conservatively, we have lowered our FY10 forecast by 7.6% and our dividend forecast to 5.5 cents. However, we still like the relative defensiveness of SingPost’s business model and its robust cashflows. Even though dividend has been lowered, yield is still decent at 7.2%. Maintain BUY with target price lowered due to revision in FY10 forecast.
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