SingPost's net profit to plummet in FY13

Blame it on cost pressure that is keeping bottom-line growth subdued.

Here's more from Maybank Kim Eng:

Transformation impacts only the top line. We appreciate Singapore Post’s transformation effort. In recent quarters, we have started to see some positive momentum in revenue thanks to the investments that SingPost has made during the past few years. However, cost pressure is keeping bottom-line growth subdued. We expect the company’s net profit to remain on a downward trend for at least the rest of FY13.

Asset divestment is unlikely. The post offices island-wide are precious assets. However, our understanding is that SingPost does not have an incentive to monetise those assets anytime soon given its substantial net cash balance of SGD161.4m.

Wait for a better entry point. SingPost is trading at FY3/13 dividend yield of 5.8%, which is no longer attractive relative to its historical band. We recommend that investors take profit and wait for a better entry point. The near-term catalyst for this stock would be to use its cash pile to make some sizeable investments in order to speed up its transformation process.