SingPost announced that it has completed the sale by tender of its HDB shop
unit at Clementi Central for a total cash consideration of S$7.9 million.
The net book value of the Property as at 30 June 2007 was S$2.6m, which gives
SingPost a gain on disposal (after deducting agent commission and legal fees)
of S$5.2m. Our earnings forecast has not factored in this gain as yet. We will
revise our earnings forecast after SingPost releases its 1QFY08 results on 30
Jul 07.
The sale is part of SingPost’s constant review of the optimization of its retail
network. The Clementi Central Post Office currently located there will be
relocated.
Based on our assumptions of 0.7% terminal growth rate, 5.7% WACC (derived
from risk-free rate of 2.8%, market risk premium of 7.9% and cost of debt after
tax of 4.6%), our DCF valuation gives a fair value of S$1.43 per share, which we
adopt as the price target.
SingPost aims for a dividend payout ratio of 80-90% of net profit, or a minimum
of 5¢/share per year. We are forecasting FY08 dividend of 6.5¢, or a payout
ratio of 85%. The resultant 5.2% dividend yield is attractive. Maintain BUY on
SingPost.
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