SingPost - CLSA downgrades Singapore Post to Underperform

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED
Research House: CLSA

CLSA downgrades Singapore Post (S08.SG) to Underperform from Outperform, says Dow jones. 

“with management considering expansion into more low-profitability businesses, we remain unconvinced about the recent run-up in share price.”

Says company’s plans to expand into overseas markets, non-mail businesses could actually hurt profitability as it will be challenging incumbents in areas that inherently generate lower returns than what it currently enjoys. 

Expects ROE, down since FY06, to continue declining as company hasn’t been able to generate same level of incremental earnings on retained profits; “we foresee this trend to perpetuate due to lack of income growth drivers and a marked increase in costs.” 

Lifts target price to $1.10 from $1.00 after adjustments to dividend discount model valuation. Shares flat at $1.23.