22.11.2017

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Oesterreichische Post confirmed at HOLD, TP EUR 39.00 - Adaption to changing markets 

We confirm our HOLD recommendation for the share of Oesterreichische Post (Austrian Post) reiterating our target price of EUR 39.0 per share

In this report we would like to highlight important recent developments with potential significant effects on financials and fair value calculations.

Among the risks we point to 1) the increased threat of self-delivery for parcel key accounts 2) the termination of the cooperation agreement with its banking partner BAWAG P.S.K. and 3) an increase of future capex needs in light of strong parcel growth

On the positive side we highlight 1) the likely introduction of different delivery times for letter mail items and 2) the evaluation of the value enhancement potential of its own investment properties

We confirm our HOLD recommendation for the share of Oesterreichische Post (Austrian Post) reiterating our target price of EUR 39.0 per share (incl. DPS 17e of EUR 2.05). In this report we would like to highlight important recent developments with potential significant effects on financials and fair value calculations.

Among the risks we point to 1) the increased threat of self-delivery for parcel key accounts (sharing the strongly growing cake with ever more competitors, but underlying market growth of some 10-15% looks sustainable and strong enough so that the potential start of self-delivery of Amazon in the greater Vienna area should not lead to a revenue decline in the Austrian parcel segment as was also the case following the entry of DHL in the Austrian parcel market), 2) the termination of the cooperation agreement with its banking partner BAWAG P.S.K. (likely resulting in lower revenues from financial services) and 3) an increase of future capex needs in light of strong parcel growth (additional capex of approx. EUR 200 mn in the next three to four years, but not threatening DPS payments).

On the positive side we highlight 1) the likely introduction of different delivery times for letter mail items (positive price effect, room for manoeuvre on the cost side from adaption of logistics) and the evaluation of the value enhancement potential of its own investment properties (hidden reserves of some EUR 2.3 per share; likely substantially increasing the current rental income of approx. EUR 15 mn p.a. currently).

Valuation: The shares of the Austrian Post (adjusted for extraordinary personnel expenses) trade at a premium to the peer group (approx. 10-20% on PER level and 30-40% on EV/EBITDA). Given the groups capital structure, its attractive dividend yield and the lower cyclicality we judge a premium as justified. Nevertheless, we would like to point to the fact that a relative comparison suggests that the remaining upside is practically limited, in our view. We derive our target price for the Austrian Post using peer group mean PER 17-19e (average 11.6x) and EV/EBITDA multiples (average 5.3x) as well as a DCF model. The relative valuation methods calculate fair values of between EUR 28 and EUR 32. The longer-term DCF model indicates some further upside for the share, suggesting a fair value of EUR46. We confirm our weighted target price of EUR 39.0 incl. DPS 17e of EUR 2.05.

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Kursliste, Lupe (c) Martina Draper

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