Österreichische Post AG Stock Analysis – Parcels Are Big

Österreichische Post AG Stock Analysis

Österreichische Post stock analysis is part of my full, stock by stock analysis, of the Austrian Stock Market that offers interesting value opportunities like POST stock is too. Check my Austrian Stocks List.

Österreichische Post AG Stock – VIE: POST

Austrian Post stock – ADR ticker: OSTIY

Postal stocks haven’t been really a great investment over the last decade as emails replaced letters and market deregulation allowed for many new competitors that cut costs to gain market share while the old government owned businesses were often unprepared.

Österreichische Post Stock Price Chart – Austrian Post Stock Price
Österreichische Post Stock Price Chart – Austrian Post Stock Price

Consequently, Österreichische Post stock didn’t do much to reward shareholders over the last decade except for the generous dividend. However, a dividend is good but not in a negative trend for the stock price because what is the point of taxable dividend when you lose your capital principal?

However, over the last few years, e-commerce boomed and now we all expect our orders to be delivered as soon as possible. Let’s see what is the investing possibility, the risk and reward, the margin of safety Österreichische Post stock.

Österreichische Post stock market capitalization is 1.9 billion EUR. The company is owned by the government and the government development funds so I would not expect hard labour negotiations to cut costs etc.

Austrian post shareholder structure – Austrian Post Investor Relations
Austrian post shareholder structure – Austrian Post Investor Relations

Österreichische Post stock analysis content:

  • Österreichische Post stock overview
  • Österreichische Post business overview
  • Österreichische Post stock fundamentals
  • Österreichische Post dividend
  • Österreichische Post stock risk and reward investment conclusion

Österreichische Post business overview

Well, as you would expect, it is a post business, mail and parcels make the most of it, parcels are gaining but mail is declining fast too.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

Despite the decline in mail, revenue has been growing slowly and steadily.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

During the COVID-19 situation, mail has declined but parcels have exploded.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

This has allowed for stability over the period.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

The problem is that parcels are costly to move, take much more space than letters for what they cost and the competition is fierce. Despite the increase of 40% in parcels, EBIT from parcels increased just 3%.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

The letter mail business has been going down and will continue to go down, that is a given.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

The government owns it, so prices will not be allowed to explode.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

The parcel business is exploding, but profits are not.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

They have just recently launched a bank? I thought posts were doing that for ages already?

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

Capital expenditures are stable, and also focused on growth, mostly logistics given the environment.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

They have a target to deliver 100% of the last mile with electric vehicles. That is nice because I hate those diesel vans bringing parcels.

Österreichische Post business overview – Source: Österreichische Post IR
Österreichische Post business overview – Source: Österreichische Post IR

It all looks like a normal postal business, let’s take a look at the financials.

Österreichische Post stock financials

Revenues have been stable over the years, margins have declined a bit, but free cash flows were stable and around 150 million per year which is not bad on a 1.9 billion market capitalization especially as the company uses most of the cash for dividends.

Österreichische Post stock key financials – Source: Xwbo Post Quote
Österreichische Post stock key financials – Source: Xwbo Post Quote

The balance sheet doesn’t really look good because there are a lot of old skeletons there in the form of 589 million of provisions. That is 4 years of free cash flows.

Österreichische Post balance sheet - Source: Österreichische Post IR
Österreichische Post balance sheet – Source: Österreichische Post IR

Nevertheless, the company will likely keep the liabilities stable at around 400 million, perhaps increase those as the payments from the provisions arise, but with interest rates close to zero in Europe, it shouldn’t be an issue.

The financial conclusion is simple, the company makes 150 million in free cash flows and focuses on dividend.

Österreichische Post dividend

On a stock price of 28.35, the dividend of 2.08 is pretty good and gives an amazing dividend yield of above 7%. If the company continues to make 150 million in free cash flow, the dividend is sustainable but the problem is that the mail is likely not going to come back after COVID and that parcels are not really at equal margin levels, actually those are half of the letter business.

Österreichische Post dividend – Source: Österreichische Post
Österreichische Post dividend – Source: Österreichische Post

However, the letter business and direct mail business is not dead yet, so there might be still 10 years of good cash flows from there and we might see improvements in parcel margins. But, that would be an investment in ‘might see improvements’.

Österreichische Post investment conclusion

I would argue the stock is fairly priced where I would not expect amazing investment returns. But, what you can expect is a good dividend on the hope that the fundamentals last for longer and that the provisions don’t come due all at once. Further, we might see improvements in the parcel business, but here I am again talking about improvements. Parcels are big in growth but also big as big, taking a lot of place and requiring a lot of time to deliver.

Mail, that is higher margin is declining, and who sends letters anymore, plus direct mail that includes all that advertising, will also likely go out of the window due to environmental issues.

I think stocks like Österreichische Post should be left to pension funds and other institutional owners like the government. Retail investors that can chose for themselves, should pick investments that offer long-term growth potential and good fundamentals. There are better stocks even in Austria!

If you want to see about such businesses, please check my Research Platform.

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