greengiraffehttp://www.valuebuddies.com/thread-4576-...l#pid97333
Read the above link and you will have a better understanding of the flushed out that resulted in the recent global volatility.
Sing Post is perceived to be a safe haven counter with BABA growth.
IMHO, I think SingPost share price performance underpinned by e-log will be shaping up for disappointment down the road.
E-fulfillment is a high capex and labour intensive business. Capex to be invested on logistic centres and fleet and the labour involved in delivery is something that BABA as an asset light middleman doesn't have. Hence while BABA thrives on volume, SingPost as a E-fulfillment company will be bogged down by rising A and higher E (ROA, ROE). Conceptually, BABA thrives on asset turn but BABA needs plenty of logistic operators to help them thrive in that role.
Sing Post happened to be that operator. In any event, traditional mails will continue its slow death hence e-fulfillment is an essential business that Sing Post need to transform.
Globally, funds are flushed and hence when everyone buys a certain concept, then a bubble is forming. Note that offshore and marine sector is out liao and can be for quite a while. Hence the amount of $ free up can be mind boggling at least within an illiquid mkt like SGX.
Odd Lots
Cert Vested
GG
GG's post has proven prescient.
Buying any business from a private equity firm, such as TradeGlobal from Bregal Sagemount is a dangerous path (In this case Bregal bought the business in Sep 2013 and sold it to SingPost in Oct 2015). Private equity firms are designed to extract maximum value from their investments whether through a sales or an IPO. In other words, you won't see Warren Buffett buying any business from a private equity firm. He will go into partnership with them and provides the capital for interest paying convertible bonds while he waits for an exit event.
Typically, there will be profit and revenue guarantees for the first few years from the prior owners, and additional payouts if the business exceeds those targets. There is also a retention bonus and equity for existing management in order to ensure continuity after the acquisition. I really hope SingPost had these provisions in place, but it doesn't sound like it so far.
M&A deals are easy. Just take any investment banker/ consultant presentation for synergies and added value and you are done. The challenging part is the integrating the acquisitions in terms of sales force, infrastructure, etc that will provide the value for the acquisition. That is why the people behind 3G Capital are so impressive. They don't buy and resell companies in 1 to 2 years. They consolidate operations and produce tangible savings in companies like Kraft Heinz and Anheuser-Busch InBev SA/NV. The question for SingPost is what were the original projections that were so far off, and how can they realize any value from it now.
I also hope SingPost learns and gains from this experience as I have fond childhood memories despite the long lines then. There is a reason why Singapore companies have failed in the United States, from Creative to Yeo Hiap Seng. Taking a hard look at the company's strengths may help. Being a big fish in a small pond requires different skills from being a small fish in a big pond.
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