Unwrapping Singapore’s Sole Postal Service Provider

• Noticeable downward trend in Revenue and Profits

• Healthy net-cash financial position

• Renowned substantial shareholders - Singtel and Alibaba

• Decrease in dividends over past 6 years

Singapore Post (SingPost), Singapore's sole postal service provider, has been delivering trusted and reliable services to homes and businesses in Singapore for over 160 years. Singpost has 3 main divisions:

1) Post and Parcel segment

It comprises the core postal and parcel delivery business of the Group. This includes Domestic post and parcels, International post and parcels, as well as products and services transacted at the post offices.

2) Logistics segment

The services are divided into Freight forwarding and eCommerce logistics, which includes front-end related eCommerce solutions, warehousing, fulfilment, delivery and other value-added services in Asia Pacific.

3) Property segment

It includes the provision of commercial property rental, as well as the self-storage business.

Evaluating Singpost Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2019, Singpost’s revenue inched up 6.3% year-on-year to S$1.56 billion, contributed largely by growth in the Post and Parcel, and Property segments.

However, the net profit after tax dived 76.7% to S$26.8 million mainly due to one-off impairment charges of the U.S. businesses - TradeGlobal _and Jagged Peak_. The total impairment costs amounted to S$98.7 million, comprising the balance of S$67.6 million for goodwill and intangible assets, and the balance of S$31.0 million for property, plant and equipment (PPE).

For FY2020, the revenue came down 15.8% to S$1.31 billion as compared to the previous year. On the bright side, the Group’s net profit after tax rebounded 328% to S$88.3 million over the period, mainly due to the absence of impairment charges for U.S. businesses incurred in the previous year.

Leverage Ratio

Looking at its leverage ratios, Singpost’s total debt to equity ratio is well managed below 40% in the past 4 years. In addition, it boasts a net-cash financial position over the same period.

That said, its interest coverage ratio – measured by profits divided by interest payments – has been coming down steadily from 15.8x in FY2018 to 9.75x in trailing 12 months September 2020.

Ownership

The single largest shareholder belongs to the Singtel where it owns a 21.7% interest in the company.

Alibaba Group is the second largest shareholder of Singpost with a 14.4% stake. According to this article, Alibaba is collaborating with Singpost to grow and enhance eCommerce logistics capabilities in Southeast Asia and Oceania through a joint venture called Quantium Solutions International (QSI).

Dividend Analysis

From the chart above, Singpost’s earnings per share (depicted by the blue bar) have been steadily declining over the years.

The same can be said for the dividends per share (green bar) as it has mostly mirrored after the earnings, other than for FY2017 and FY2019.

Conclusion and Prospects

On 19 October 2020, Singpost announced that it intends to acquire an aggregate 38% equity interest in Freight Management Holdings Pty Ltd (“FMH”) for an aggregate consideration of approximately A$85.0 million (approximately S$84.1 million).

FMH is a leading 4th party logistics service company in Australia. Through the use of proprietary technology, FMH manages and executes its customers’ supply chain and distribution requirements. The investment will allow the SingPost Group to further scale its Business-to-Business-to Consumer (B2B2C) logistics capabilities in Australia and capitalize on the growing eCommerce segment.

In the 1H FY2021 press release, Mr Paul Coutts, Group Chief Executive Officer, said:

“SingPost is capitalising on the growth in eCommerce, which has resulted in our rise in revenue, off-setting the decline in letter mail volumes in the Domestic Post and Parcel segment.”

He added:

“We remain judicious in managing our expenses, cashflow and liquidity, even as we execute our key strategic initiatives such as the Future of Post and recent investment in Australia in order to secure our future.”

To end off, SingPost has been piloting a sustainable national mail delivery system to drive long-term business performance and value creation. In September 2019, SingPost unveiled a smart letterbox delivery system prototype and the public trial will take around 1 year.

The new smart letterbox will have several state-of-the-art features, including push notification through an app for residents whenever they receive mail; larger containers/drawers to hold eCommerce items; and a keyless access system for mail retrieval.

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