No significant catalyst in sight
Story: Net underlying profit of S$34.8m was up 11% y-o-y but 5% lower than our expectations of S$36.5m.
Point: Lower than expected mail revenue coupled with higher operating expenses were the main culprits. We do not expect operating margins to improve anymore due to higher labor-related costs and greater price competition in the logistics segment.
Relevance: We have lowered our FY08 and FY09 core earnings estimates by 9% and 5% respectively. Our one-year DCF derived (WACC 6%, terminal growth 1%) target price is S$1.30. Due to limited upside, we downgrade Singpost to HOLD
