SOME analysts left their ratings on Singapore Post (SingPost) unchanged on Monday (Dec 23), although corporate governance issues were raised as a risk following a fiasco at the company which resulted in three senior executives being fired.
Ada Lim, equity research analyst at OCBC, kept her “hold” rating on SingPost, although she lowered the target price of the stock to S$0.54 on Monday, from S$0.58 on Dec 2.
However, she raised her equity-risk premium assumption up by 50 basis points to 5.5 per cent to reflect “greater corporate governance risks and uncertainty” in the company. Equity-risk premium is a metric used to measure the risk-reward trade-off.
Shares of SingPost had sold off on Monday, plunging 10.7 per cent or S$0.50, after the company announced late on Sunday night that it had fired three senior executives, including its group chief executive Vincent Phang. It said that they were found negligent in the handling of internal investigations over a whistle-blower’s report.
Investigations found that three managers in the international business unit had “committed serious breaches of the company’s code of conduct” regarding deliveries for “one of its largest” customers.
SingPost had informed the customer about the incident, and both parties have agreed on a settlement, which includes paying a settlement sum.
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The settlement is not expected to have a material impact on the company’s net tangible assets or earnings per share for the 2025 fiscal year ending Mar 31, 2025, according to OCBC’s Lim.
The analyst also noted that SingPost will be divesting its Australian business for an enterprise value of A$1 billion (S$848.4 million), and it is “unclear” if the recent developments will have an impact on the sale of its Australia business.
“Given that Australia had been a significant growth driver for SingPost in recent years, we maintain our ‘hold’ rating while awaiting further clarity on its next engine of growth, backed by a stronger balance sheet and greater financial flexibility,” Lim wrote.
Maybank Securities analyst Jarick Seet told The Business Times on Dec 23 that he is maintaining his “buy” rating on the stock.
“The mid-term expectation (for SingPost) would be for the board to continue to execute its key initiatives of enhancing shareholder value in its strategic review and continue to monetise its non-core assets,” he added.
Overall, one risk that Seet sees for the company is regarding the execution of the sale its non-core assets, and whether the board will distribute the returns to shareholders or hoard the cash.
Previously, Seet viewed the group to be “deeply undervalued”. In his Dec 9 report, he had proceeded with his “buy” call on SingPost with a raised target price to S$0.77 from S$0.74 earlier in November.
Before this latest development, global ratings agency S&P had placed SingPost on credit watch negative, following a change in its future strategy and the sale of its Australian business.
