Wednesday, January 30, 2008

Singpost 3Q results released

Tonight is the important FED meeting results. I bet on another rate cut.

Let's not talk about the market today, it's boring as usual. Nothing is going to happen until the FED interest rate meeting is over, then after that, we'll cheong up and then sink. The question mark is whether we'll sink more than we cheong, haha

Singpost posted its 3Q results today. In summary, Q3 revenue grew 9.2%, net profit rose 7.8% and a dividend of 1.25 cts per share is declared, which is the norm. 3Q is traditionally the busier quarter for singpost, so the increase in revenue is nothing to be extremely proud of. Business as usual I suppose. What is a little worrying is that despite the rise in revenue in a variety of sectors, the cost increment is higher, hence the margins got eroded slightly by less than 1% comparing between FY07/08 3Q and FY06/07 3Q. A huge part of the increase in expenses comes from volume-related costs - comprising mainly of traffic and mail outsourcing expenses. Not too sure what is meant by that, but it's the greatest increment in expenses. Do singpost outsource mail? Maybe they do...

Operating expenses are broken into 3 parts:

1. Labour and related cost: up 10.6%

2. Volume related cost: up 16.5%

3. Selling, admin, depreciation and others: up 5.8%

It's quite encouraging to see that for the past 9 mths, the total revenue had reached 81% of the total revenue earned in FY06/07. If Singpost maintained the revenue earned for this quarter into the next quarter, the total revenue would have exceeded Fy06/07.

Having briefly looked through the annual report for Singpost in 06/07, I discovered a few things:

1. Lee Hisen Yang is sitting in the board

2. The net margins of around 30% for every quarter - it's higher than i expected

3. It's listed in 2003...i thought it's way much earlier

4. The revenue, operating profit, net profit, free cash flow and dividend is so consistently stable, showing a steady growth....but of course, this is their annual report. I have yet to calculate them myself.

They did mention about the challenges faced by the liberalisation of basic mail services. The margin pressure from market liberalisation and rising costs are their main concern. So what are they doing to prevent their margins from getting eroded?

They said they are going to focus on driving growth by

1. Growing their core competencies - which is their core business of mail and logistics

2. Leveraging their network - which is to offer higher value products and services, through their network e.g shopping through their distribution network

3. Extending their regional reach.

A very interesting thing they mentioned is that they will review its non-core business and will be exploring opportunities to unlock the value of SingPost centre (i supposed they are talking about their big HQ at paya lebar mrt there?).

A consistent dividend yielding company which still strives on growth...I like the idea. Need to evaluate whether they are just pacifying the concerns of shareholders or they really have a battle plan in mind.

Dow -33 pts now.