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Broker's take: SingPost's second Alibaba investment takes time to digest

38266266.5 (39052656) - 12_07_2016 - mrsingpost.jpg

SINGAPORE Post (SingPost) will take time to digest the second Alibaba investment and other acquisitions, an OCBC Investment Research report on Friday said, even as the stock surged some 5 per cent on the news.

The postal and logistics service firm said on Thursday evening that Alibaba has obtained regulatory approval for its second investment in SingPost worth S$187 million. This would increase Alibaba's stake from 10.2 per cent to 14.4 per cent, with the investment expected to be completed by Feb 28, 2017. Alibaba is SingPost's second largest shareholder after Singtel.

It has also completed the joint venture with Alibaba through which Alibaba has invested S$86.2 million for new shares of Quantium Solutions, SingPost's logistics subsidiary.

"One of the uncertainties for the stock is now put to rest, and this could result in a positive knee-jerk reaction on the share price," the brokerage said.

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"The group's dividend policy is likely to be revised downwards, but more importantly time is still needed for integration and synergies for substantial earnings growth following the group's earlier acquisitions."

The brokerage kept a "hold" on the stock, with a target price of S$1.42.

Shares of SingPost gained S$0.065 to S$1.585 as at 10.32am. It is the most actively traded stock on Friday morning.