Friday, January 30, 2009

Singpost 3Q08's result

Singpost announced their 3Q08 results today. As usual, their results are just that...boring. It's not doing exceptionally well, nor terribly bad either. It's just plodding along, so to speak. A few pointers to take note:

1. 3Q08's operating profit falls 1.2% compared to 3Q07. However, if excluding all extraordinary items, the net profit for both 3Q results are nearly the same.

2. Comparing 9M08 to 9M07, the operating profit dropped a little too (0.7%). Again, excluding all extraordinary items, the net profit for 9M08 is a little better, being 7.5% above 9M07. As mentioned, Singpost's result is nothing spectacular but nothing to worry about too.

3. I noticed that for 3Q08, the selling expenses went up nearly twice as much (43.5%). However, the absolute amount is quite insignificant, being just around 4% of the total expenses incurred for the same quarter. It's stated that they provided more in terms of doubtful doubts in view of the bad times. Singpost do need to curb their expenses though. The revenue for this quarter is up 1.6% from the last year, but the expenses expanded by 5.2%. Of course, this naturally dragged down the net profit for the quarter.

4. Diluted EPS for the past 9M08 is 5.891 cents. Today's closing is 77 cts. Thus, the PE is 9.8x based on annualised EPS for the past 9 months. For singpost's standard, this PE is actually quite low already. Still, in this kind of times, sub-10 PE is quite the normal. Maybe even sub-5.

5. Current assets for this quarter is 1.05, compared to 0.90 last quarter. There is an increase in the percentage of cash/cash equivalents over the current assets this quarter. Singpost increased its cash/cash equivalents to current assets from 57% last quarter to the present 62%. Since they do not hold much inventories, quick ratio is pretty irrelevant here. In my opnion, nothing to worry about them being unable to meet short term debts.

6. Long term debts consists of unsecured bonds, expiring on 11th April 2013 with fixed interest rate of 3.13% pa. This bonds actually forms a huge part of their total liabilties (58.3%), so it's important to see how they are able to pay for it when the time comes. There are still 4-5 years more to go before it's due, so I don't think there's a concern about that now.

7. Cash flow from operations are still coming in (a total of 63 mil). I doubt they are going to go into any major investing in their PPE, so net cash should still be positive. The major outflow of cash comes from payment of dividends to shareholders. It's 'bleeding' 24 mil this quarter. Overall, there is around 29 mil of cash entering their coffer this quarter, bringing their total cash/cash equivalent to 131 mil. If they are going to pay a special dividend next quarter (which they normally do, usually to a tune of twice the quarterly dividend i.e. 2.50 cents per share), it'll take away around 48 mil.

Is it likely? I think so. The payment period of their bonds are still far away, and they are still getting in a good cashflow of 60+ mil. Then again, last quarter was the better quarter for Singpost due to the holiday seasons, so 4Q might be slower. Still, there's still a good chance for them to pay special dividends next quarter. Let's see how the situation goes. At least 1.25 cents per quarter is their dividend policy, based on my buy price, I should be 'guaranteed' a yield of at least 4.2% pa.


Anonymous said...

Yep. There is really nothing exciting about Singpost's business. But I guess the dividends are good.

Perhaps another company you can do a write up for is ST Engineering?

la papillion said...

Hi FF,

Do you have Singpost too? Given my knowledge of the company now, I wouldn't have invested in it, especially not at the price that I went in. The price that I entered, $1.18 is around the fair value.

As such, my concern for singpost is whether 1) they will fold up and 2) if they will continue to give out dividends at a min of 5 cts per year. If both are alright, then time will make this 'wrong' investment a right one.

ST's on my watchlist. However, I don't think I'll do a writeup on it. Time's a little short for me these days.

Happy new year, wish you well in your health and wealth!