Brokers' take: UOBKH upgrades SingPost to 'buy' on e-commerce growth
SINGAPORE Post (SingPost) S08 is likely on the verge of a strong recovery and should continue to benefit from the growth in e-commerce in both domestic and overseas markets, said UOB Kay Hian.
In a report on Wednesday (Mar 2), analyst Llelleythan Tan upgraded the postal service provider to a "buy" call and raised its target price to S$0.78 from S$0.75, as he expects the e-commerce segment will outperform in the fourth quarter of FY2022 and beyond.
Shares of SingPost were trading at S$0.64 as at 11.27 am on Wednesday, up S$0.005 or 1.6 per cent.
SingPost on Friday reported a 46 per cent on-year growth in group operating profit to S$38 million for its third quarter ended Dec 31, 2021, driven by the year-end seasonal peak.
Revenue also grew 24 per cent on year to S$437 million, driven mainly by its freight-forwarding arm Famous Holdings, e-commerce logistics growth and the consolidation of Freight Management Holdings as a subsidiary.
Tan expects the growth in e-commerce revenue, which has already offset a decline in letter mail, will be its domestic main revenue driver moving forward.
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The analyst is also more optimistic on international post, as the reopening of Singapore's borders will likely drive a return in international flights and help soften air freight rates closer to pre-pandemic levels by the first half of FY2023.
Additionally, he noted that SingPost's Australian operations have remained steady despite Omicron outbreaks, while occupancy rates at its property SingPost Centre have also remained stable.
Tan said with "an expected inflection point approaching", the counter likely has significant potential upside at its current attractive price levels.
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