Singapore Post Limited (SGX: S08), or SingPost, is a mail and logistics company, organised into four major segments of post and parcel, logistics, and eCommerce and property.
At its current price of S$0.98 (at the time of writing), Singapore Post’s shares are trading at 30% below its 52-week high price of S$1.39. This raises a question: Is Singapore Post cheap now? This question is important because if the firm’s shares are cheap, it might be a good opportunity for investors to dig further into the fundamentals of the business.
Unfortunately, there is no easy answer. However, we can still get some insight by comparing Singapore Post’s current valuations with the market’s valuation. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Singapore Post currently has a PB ratio of 1.4, which is higher than that of the SPDR STI ETF’s PB ratio of 1.0. Similarly, its PE ratio is higher than that of the SPDR STI ETF’s (22.2 vs 12.0). Here, we calculated the PE ratio of Singapore Post using its underlying net profit of S$100 million in FY18/19 rather than its net profit of S$19 million since the latter was impacted by a significant impairment for the year.
Still, income investors might be enticed by the company’s dividend yield of 3.6%, which is higher than the market’s yield of 3.4%. The higher a stock’s yield is, the lower its valuation.
In sum, we can argue that Singapore Post is priced at a premium to the market given its high PB ratio and high PE ratio, notwithstanding the recent decline in its share price.
Yet, income investors might find the company’s current dividend yield of 3.6% attractive. For this group of investors, they will need to assess the sustainability of Singapore Post’s dividend for the foreseeable future before buying its stock.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.
Motley Fool Singapore 2019