This year, Austrian Post delivered a strong share price performance (up 25% YTD), clearly outperforming both the mail segment (-2%) and our logistics universe (+7%). We trim our 2017-19 estimates, but keep our TP at EUR40. With 1% downside, we downgrade our rating to Hold.

Strongest mail stock performer so far this year

Austrian Post has been the strongest performer among the mail stocks this year. Up 25%, it has clearly outpaced others in mail (-2%) which is the weakest sub-segment in our logistics universe (+7%). The stock recovered strongly after underperforming in 2015-16, due to Deutsche Post ’s entry into the parcels segment in Austria. However, this effect was widely exaggerated as the results clearly revealed.

Aras deconsolidated again, estimates reduced slightly

In our old numbers, we consolidated Aras at 75%. We factor in just a 25% stake now as a takeover has become unlikely after a quarrel with the founding family. We cut our 2018 profit estimates by 5% on average.

Unlucky with acquisitions

After the exit from troubled Trans-o-flex, the entry into the Turkish Aras Kargo was not really beneficial either. Although it is still growing, investors have grown weary of this investment. Raising the stake proved to be far more difficult than expected, so a full exit is now more likely. Clearly, that would deprive the company of a source of growth. Flush with non-yielding cash, an acquisition would have been EPS-enhancing anyway.

TP reached, with 1% downside, we downgrade to Hold

In 2015-16, the stock dropped from EUR46 to EUR27, after the news of the entry of giant Deutsche Post in the parcel segment in Austria. However, as seen in other countries, the impact turned out to be rather modest, partly due to the defensive tactics undertaken by Austrian Post. It has performed well YTD and it is the best performer among the mail stocks. It is up 25% YTD versus the mail sector at -2%, which was the weakest performance of the four sub-segments within our logistics universe (+7%). Despite the slightly lower estimates our valuation methods (historical multiples, peer comparison, FCF, EV/CE and DCF (WACC 6.3%, terminal growth -1%) still point to EUR40, so we maintain our TP. However, with 1% downside we downgrade our rating to Hold. That means we have no Buy-rated mail stock, which is consistent in an environment where interest rates could stop falling/trend up, affecting the performance of these yield vehicles.