Analysis of SingPost

On 29 December 2016, SingPost finally unveiled a new Chief Executive Officer (CEO) through appointment of Mr Paul William Coutts who was previously from Toll Global Forwarding, one of the five divisions in the Toll Group. On the basis of the 2Q2016 financial performance, the new CEO will have his work cut out for him. This article contains my analysis of SingPost.

Suffice to say, the business model has been disrupted by digital technologies, which led to declining traditional letter mail volumes in recent years. 2Q2016 financial results revealed that SingPost is a company still “work-in-progress”. Underlying net profit for Q2 fell 27.9% which the company attributed to “transformational investments and challenges”. Total expenses increased by 23.7% due to higher expenses in the eCommerce business and costs related to the new Regional eCommerce Logistics Hub.

As the management embarks on its business transformation journey, the incoming CEO has an unenviable task of leading an institution that has faltered in recent years. While the company is still making profits, operating profits across all its business units declined by doubt digits compared to last year. Its eCommerce unit lost $6.8 million and $10.3 million in Q2 and H1.

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The eCommerce unit will likely to continue burning cash as SingPost seeks to enhance the eCommerce logistics capabilities to better serve the region growing online retail markets. A lot will also depend on whether the management is able to integrate and extract synergies from acquisitions made over the past few years.

Notably, there was an increase in short-term borrowings, which led to a net current liability position of S$239.1 million, compared to S$133.2 million as at 31 March 2016. The cash and short-term funds were largely utilised for residual expenditure on committed capex for construction of the SPC retail mall and Regional eCommerce Logistics Hub. The increased borrowings is essential to fuel future growth but this has caused the balance sheet to appear slightly shaky.

Cash flow from operating activities was $21.3 million, an improvement from negative $37 million last year. Capital expenditure is expected to remain high in FY2016/17 from committed capital expenditure for the ongoing redevelopment of SPC retail mall. Thus, the investment from Alibaba Group would be very helpful in tiding SingPost over this critical phase of transformation. Infocommunications Media Development Authority has given approval for Alibaba to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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4 thoughts on “Analysis of SingPost

  • February 1, 2017 at 12:09 pm

    Given Alibaba’s entry price is higher than the current market price, my plan is to go with the big boys with a small position.

  • March 4, 2017 at 5:48 am

    Given the huge volume of alibaba business and Lazada move and the timing is just right to have this bearish event and sentiment facing SP. This is an opportunity or risk that have been waited many years.

  • March 4, 2017 at 3:12 pm

    Hi Calvin,

    I will be cautious with this counter given the change of management and the business disruptions.


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