JvH schreef op 28 juni 2019 08:18:
PostNL: Great Opportunity With Limited Risk
Jun. 27, 2019 10:13 PM ET|2 comments | About: PostNL N.V. ADR (PNLYY), PSTNY, TNTFF
The stock price has declined by 40% over the past two months.
The company’s intrinsic value is likely close to €3.28 per share.
Shares have limited downside of 20%, since the market is pricing in the worst-case scenario.
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PostNL (OTCPK:PNLYY, OTCPK:TNTFF, OTCPK:PSTNY) share price has fallen by 40% over the past two months, offering a great long-term investment opportunity, since the market has incorrectly punished the company for its 1Q2019 results, which were weaker than expected. Alibaba's (BABA) intention of opening a distribution centre in Lieje to start offering logistics service itself has also been a key factor in the decline, and as a result, PostNL is trading at quite depressed multiples.
The company’s intrinsic value is likely close to €3.28 per share (121% upside considering a price as of 06/25/2019 of €1.43), and even if we’re wrong in our investment thesis, the company would have a limited downside of 20%, since the market is pricing the worst-case scenario for PostNL.
Key investment risks include regulatory denial to the combination with Sandd or, if approved, integration issues. Other risks comprise lower EBITDA margins and growth in the parcel segment due to rising competition and failure in the cost-cutting strategy.
PostNL spun off TNT N.V in 2011. Since then, it has transformed itself from a traditional mail business into a logistics service provider for the Benelux area. By now, the company delivers, on average, 800,000 parcels and 7 million letters per day. It is the main player in the parcel delivery business in the Netherlands and accounts for around 65% of business volumes in 2017. PostNL is also the biggest company in the mail market, and if the merger with Sandd is carried out (and eventually it will be), it would virtually control the whole market.
As mentioned in the title of this article, there is a great opportunity to invest in PostNL given that the risks are limited, since the market is actually pricing in the worst-case scenario. This asymmetric risk-risk reward stock is optimal to profit for long-term secular trends, such as e-commerce growth, with a market leader in the Benelux area. Despite the positive outlook, it is also important to be aware of the risks discussed in the article.