Shares of PostNL have been under severe pressure over the last couple of weeks on the back of: 1/ the sudden departure of CEO Harry Koorstra; 2/ temporary delays in the roll-out of Mail in NL reorganization; 3/ risk of M&A; 4/ arbitration with the pension funds regarding top-up payments; 5/ an increase in the IAS19 write-down; 6/ cash dividend insecurity; and 7/ political uncertainties in the Netherlands.
As a high Beta play we believe trading could also remain volatile over the coming weeks. Since we see no real big operational issues and valuation is fairly depressed, we stick with our Accumulate rating on PostNL.
Upcoming triggers are: 1/ an increase in the long term Dutch government and high quality corporate bond rates which could have a positive impact on pensions and the IAS19 write-down; 2/ a pension resolution with the pension fund, unions and the Dutch government which should provide clarity on the pension burden; 3/ further detail on the M&A ambitions; while 4/ management expects to have more news on the hick-up in mast plan implementation over the coming 8-10 weeks.
We valued the mail activities on DCF and added to that the proceeds coming from the sale of the 29.9% stake in TNT Express. We lower our TP to € 4.8/sh (from € 5.8/sh) on the back of uncertainties relating to the Master Plan execution and phasing in cash-outs. PostNL is trading at an implied 10-11% dividend yield, based on a proposed dividend of € 150m p.a. This compares favourably to the 7% offered by Austrian Post. However, investors are likely probability weighting the dividend based on uncertainties relating to distributable equity, pension cash-outs, master plan execution …