Here is a short analysis of SIngpost.
Not vested, but interested to accumulate at the right price. This is a follow up from my previous post
Here are some numbers:
While margin is getting worse, do note that revenue and OP of the cursed mail sector is not falling off a cliff, it is not even on a continuous decline. Net profits is falling, but that did not tell the full story, volume and revenue are still strong.
Look at FCF, the av. for 9 years is 160 mio. The weakest year of 130 mio is still enough to sustain the 6.5 cents DPS. 6.5 DPS need 120 mio. Dividend is only 75% of av. DPU. My mistake about it being less than 70% in my earlier post.
Why am I looking at it again?
While the logistic and retail sector margin is still depressed, I believe their strategy of managing e-commerce for renowned brands like Adidas is the right strategy without significantly increasing costs, they have their warehouse capability to house Adidas or any other brands' inventories.
I consider Singpost mail business a monopoly. Although anyone can send up a mail business when the sector is liberalized years ago, the fact that no one come in for the bite is a good outcome. It means its monopoly status is supported by market circumstances, not by regulation. Regulation is risky business when the monopoly rights get taken away, there is no such nasty surprise.
How much to pay for a monopoly? For SGX and SPH, I need to use 6-7% discount rate to justify current prices. For SIngpost?
9% discount rate and a reasonable 3% growth, will give a DCF valuation of $1.4. If I apply 20% MOS, then the right price to enter will be $1.12.
I don't really see why SIngpost is trading at a higher discount to other monopoly, maybe because SPH has found retail property segment for growth, and SGX has the derivatives business as well as the upswing of trading as growth. In terms of yield, SIngpost is also slightly higher than SGX, and is almost 4.8% at current price.
If you see Singpost struggling with logistic, and this is the best you can get. You get fair value, if you think logistic and retail can provide the growth, any southward movement of price will only make the counter more attractive.
I definitely will not wait till $1.12 to enter. As for what price, hmm... depends on my wallet and my bonus, and where my family want to go for holiday... hahaha