Singapore Post's plan to consolidate its operations at its Tampines eComm logistics hub will free up space at headquarters SingPost Centre from which potential leasing revenue of some $9 million can be generated, says Maybank Securities Jarick Seet.
The company has announced a $30 million plan to boost its e-commerce logistics capacity now run out of Tampines. SingPost Centre meanwhile is for sorting mail - a dwindling business - and smaller parcels.
The consolidation, expected by the middle of next year, will free up about 83,000 sqft of industrial space at SPC, opening up more leasing opportunities, suggests Seet in his March 17 note.
"If all operations are shifted there, about 376,000 sqft or so of industrial space could be freed up which represents an estimated $9 million leasing opportunity annually based on $2 psf," estimates Seet.
The company could also potentially apply for a conversion of land use from industrial to office and or retail which would lift SPC’s valuation significantly. However, this move would require regulatory approvals.
At the moment, out of SPC’s 1.47 million sqft in gross floor area, 37% is classified industrial, 45% office and the rest retail.
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SingPost's move to consolidate the logistics operations came on the same day shareholders approved the sale of its key Australia unit FMH for $867 million. The deal is slated for completion by the end of this month.
Proceeds will be used to pay down debt, reinvest for new growth and to be distributed to shareholders as special dividends.
In the meantime, the company is continuing its talks with the government to come up with a new business model to stem the structural decline of its domestic mail operations.
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"While we expect SingPost’s international and Singapore businesses will continue to face challenges, the key for us remains the asset monetisation angle with potential for special dividends," says Seet, who is keeping his "buy" call and 77 cents target price.
