Now that the risk of unlimited pension obligations are off the table and the cash contribution to the pension has also been reduced, I think that it is safe to value PostNL as an equity with bond like income. The market sure won't agree with me yet, because PostNL still hasn't reinstated their dividend, but it is only a matter of time.
Since it is known that PostNL will be selling their stake in TNT Express in the mid term, my calculation of PostNL's Enterprise value will take the sale into account. PostNL can get at least 1 billion Euros ($1.4 billion) for their stake in TNT Express and my best guess is that they will use the proceeds to pay off debt. So, with 1.6 billion euros of long-term debt, PostNL's debt will be reduced to roughly 600 million euros. This would equate to a current EV of 3.72 billion (4.72 billion-1.0 billion=3.72 billion). I agree with management's projections that by 2015 PostNL should be earning at least 300 million euros, which would equal an 8% yield to today's price (300/3720=.08).
More of an optimistic estimate would be that PostNL would receive 1.5 billion euros in their sale of TNT Express, which could leave PostNL with debt of 100 million and an EV of 2.65 billion euros. Management's upper estimate of EBIT in 2015 is 370 million euros, which would equal a ~14% yield to today's price (370/2650=13.9%).
Averaging the 8 & 14% yields would leave me with an estimate of 11% yield. We can compare this rate to treasuries, which is a joke at the current time, but historically treasuries have yielded 5-6% and the market has returned 7-9%. I think that it is safe to say that an investment in PostNL still continues to be a wise choice that has a high probability of beating the market over the long-term. I estimate that a 6.6% yield would be a fair valuation for a company such as PostNL by 2015. That would mean that a 40% increase in share price (11%*.4=4.4+6.6=11) would equal a 6.6% yield.
Catalysts
Since the unions have agreed to renegotiate the pension plan, PostNL is very likely to return to paying a dividend in the near future. A reinstated dividend proves to the market that the company will not go bankrupt and that the reorganization is finally keeping up with the mail declines. The sale of TNT Express would also signal to the market that more cash will be available to service PostNL's debt and to reinstate the dividend. My guess is that the demand for yield in this environment is very high and many income-seeking investors will be attracted to PostNL and share prices will rise accordingly.
Conclusion
I still think that it is not too late to make a long-term market beating investment in PostNL. Since the pension risk is nearly off the table, PostNL has a much smaller probability of going under and has many advantages over its competitors in the Netherlands and in Europe. As a totally privatized company, PostNL is able to deal with some of the most difficult postal market conditions in Europe. It won't be long until other European markets start to face similar conditions positioning PostNL very well to compete for market share in the international space.
Additional disclosure: This article is meant for instructional purposes and not meant as a recommendation to buy or sell. The only kind of intelligent investing is through your own due diligence.
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