SingPost acquires 30% of DataPost shares

This latest transaction leaves DataPost at a $20m value, close to its NTA of about $19.5m as on 31 Mar 2011, says OCBC.

Netherlands-based printing firm Oce N.V. sold its share as it considered DataPost's activities "too far removed" from its current core businesses of printers, copiers and other services.

Here's more from OCBC:

Completed acquisition of DataPost . SingPost recently announced that it has completed the acquisition of 900,000 shares of DataPost Pte Ltd, representing the remaining 30% of the entire issued share capital of the latter not owned by SingPost. The purchase consideration of S$6m has been paid in cash and was arrived at on a willing buyer willing seller basis, taking into consideration the business, operations and net assets of DataPost, amongst other things. Indeed, we note that the latest transaction values DataPost at S$20m, close to the company's NTA of about S$19.5m as at 31 Mar 2011.

To develop hybrid mail business. The seller of the 30% stake is Netherlands-based printing firm Oce N.V., which is part of the Canon Group. According to its press release, Oce N.V. decided to sell off the stake as it considered DataPost's activities "too far removed" from its current core businesses of printers, copiers and other services. However, with this acquisition, SingPost will have increased flexibility to further develop its hybrid mail business in the region and provide a wider suite of services.

Based in Singapore, DataPost is involved in the business of electronic printing and despatching services. Outsourcing of such non-core functions in companies such as financial inst i tut ions, government organisations, utilities and telcos has grown over the years and we believe that DataPost should remain relevant in the future. The company also has presence in the region, including Malaysia, Hong Kong, the Philippines and Thailand.

Restarting M&A activity? SingPost has been keen to pursue regional growth, and acquired cross-border mail logistics company Quantium Solutions in May 09, besides its investment in technology company Postea Inc in the same month. However, there was no news on the M&A front for the most of 2010, which could be partly due to the resignation of the Group CEO in that year. After an organisational restructure that was announced in Jan this year, SingPost seems to be ramping up on M&A activity with the investment of SuperToken (involved in e-commerce business) in Feb 2011 and this latest acquisition of DataPost.

Maintain HOLD. We continue to like SingPost for its stable operating cash flows, prudent management, and decent forecasted dividend yield of 5.4%. Meanwhile, we await more news on the M&A front. However, given the limited upside potential to our DCF-based fair value estimate of S$1.21, we maintain our HOLD rating for now.

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