Singapore Post

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SingPost Voluntarily tendered resignation to pursue other opportunities

In February 2021, it came to the attention of the Board that there were indications of lapses in internal procedures and protocols relating to the engagement of an advisor for certain Australian and New Zealand subsidiaries of the SingPost Group, which occurred in 2020 during the tenure of Mr Coutts as the Group Chief Executive Officer.

https://links.sgx.com/1.0.0/corporate-an...d454df4523

Stay home and stay safe, everyone.

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SingPost@63
1QFY2021 update
https://links.sgx.com/FileOpen/Q1_FY22_B...eID=677599

https://drive.google.com/open?id=1DFtGk5...O625YYfvMw

Stay home and stay safe, everyone.

[weijian]

The 2nd high quality piece at Corporate Monitor is on Singpost.

The only unfortunate thing is that it is telling us what most of us already know (and hence what to avoid). Of course, Corporate Monitor is "non-profit" and so we can't expect it to be giving FOC advice on what to profit from

I assume the end game for Singpost will be very similar to SPH and SMRT. But we wouldn't be expecting a bidding war for its single asset.

Singapore Post: Analysis of its Strategic Transformation and Governance 2024

Management of capital is one of the 5 strategic thrusts for SingPost, but it is here that the group has not fared well. Management has stated that the target return on equity (ROE) is in “the teens”. However, SingPost‘s ROE has been below that since 2017. Worse, SingPost didn’t even earn its cost of equity, which we conservatively estimate to be 9%. In the last 10 years, SingPost’s ROE only exceeded the cost of equity 3 times, and not since 2019. ROE fell to as low as 2% in 2023, and not much better in 2024, at 3.8% after stripping out the valuation gain (which is non-cash) of SPC. While reconstructing its reported ROE, we had also observed that SingPost had selected an approach that wholly excludes its perpetual securities, thus boosting the reported ROE. We would like SingPost’s management to articulate a more specific ROE target, and more importantly a road map and timeline to achieve that. Otherwise, talk of an ROE target in “the teens” rings hollow.

By not achieving ROE above its cost of equity, SingPost has been destroying shareholder value. Admittedly, this is largely due to the rapidly declining profitability of the Post & Parcel business, but management is ultimately responsible.

In conclusion, SingPost faces daunting strategic challenges that are inter-connected. The Post & Parcel business continues to be the root of SingPost’s problems. The Australian business is doing well but could not make up for the profit that Post & Parcel used to earn. There is no growth in the property business, which is non-core anyway. Finding growth is the biggest problem for the group. Without growth, balance sheet leverage will continue to be a problem and will expose SingPost to financial risks. Without growth, ROE will continue to be depressed. However, a leveraged balance sheet in turn constrains growth, as SingPost lacks the financial resources to fund the Australian business, which is the only one with realistic growth prospects.

https://corporate-monitor.org/singapore-...overnance/

[postage paid]

I think the current environment does present tailwinds for the strategy SingPost is trying to execute.

Sell Assets + refinance debt for growth

The sad thing is that it has been so poorly managed, there is only 1 strategy available.

In addition to Australia, the new post model in Singapore will decide the fate of the business. From past experience, SMRT, SPH I think a capital friendly outcome has a chance of occurring. Let an entity with a stronger balance sheet, and lower cost of capital own the physical infrastructure, and SingPost just manages the infra for a fee.

Quite a good case to do a probability weighted SOTP valuation

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SingPost@56cents



Singapore Post Ltd. 'BBB' Rating Placed On CreditWatch Negative Over Strategy Reset ( https://links.sgx.com/FileOpen/SnPResear...eID=827274 )

A lot had happened and it's true that SingPost management had wasted one opportunity that they had built up in the last 4 years.

What ever done had been done.

Looking forward to see how SingPost execute it's strategy and the impact on it's share price


Gratitude!

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SingPost@56cents

S&P provided details for  'BBB' Rating Placed On CreditWatch Negative Over Strategy Reset
https://links.sgx.com/FileOpen/SnPCredit...eID=828155

Seems like e-commerce hub is the way to go for SingPost?


Gratitude!

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SingPost@56cents

SingPost increases price of postage-paid smartpac parcels.

In October 2023, SingPost increased postage rates for standard regular mail, from 31 cents to 51 cents. This was due to declining mail volumes and the rising cost of expenses such as labour, utilities and fuel, the company said.

In September 2024, ST reported that SingPost had closed 12 post offices, or one in five branches, in the past two years. This came as most people turn to electronic communication instead.

Credit: Straits Times (link)



Gratitude!

[weijian]

According to economic theory, when demand reduces, the way to reverse it is to reduce the price. So SingPost is doing the opposite. It is EITHER accelerating the digging its own grave OR it thinks it is following the laws of luxury (where high prices begets high demand)

The proposed exit of its "profitable" Aus investment is the start of the end of SingPost as a listed company. Shareholders know the end game is some sort of "government bailout" along the lines of SPH/SMRT, but we can arguably conclude that SingPost isn't that much critical than those peers.

Is there still value to be extracted in the eventual gov bailout? Probably yes. Is the timeline clear? What is the opportunity cost for our capital/brain power?

P.S. There were 2 groups of shareholders with different outcomes for the SPH takeover. One group made decent money because they got their timing approximately right. The other group were the long term shareholders and got a different result.

[postage paid]

I am very happy the Board decided to sell the Australia business. It was worrying when the Chairman gave a reply that Singpost should be seen as a growth stock during the AGM. 

https://www.singpost.com/sites/default/f...024%29.pdf

Now the business is reorganised into Postal Services and Property.

Postal Services has 2 components. 

Letters demand is dying out, and companies will only send letters when they must do so, likely driven by regulations.

Parcel delivery is extremely competitive, needs scale, and margins are very low.

Property also has 2 components

Singpost Centre is very well located, beside and MRT. However, the usage is 40% industrial, 40% Commercial and 20% Retail. There is upside if the industrial can be converted to commercial, as it is inefficient to have industrial land use near a prime location such as Paya Lebar MRT. Singapore is very efficient, so its likely the conversion will happen.

Latest Q&A with management talks about the change of use.
https://www.singpost.com/about-us/invest...details/52

Network of post centres can be reduced, freeing up capital.

Finally, the layers of Board and management can also be reduced, consistent with the reduction in company size and volume of business. Which is something that was raised at the AGM, but no one will be willing to downsize themselves, and even if forced, will not be in a hurry to do so. Downsizing savings will flow immediately to the bottom line. Board costs $1.2M, while CEO and KMP costs $8.4M (total 9.6M). Business made a profit of $81M.

Overall current pricing at $0.56 isnt compelling, especially when there are lots of other companies with better business models whose valuation has been hit by the repricing of interest rate expectations. A high interest rate just to keep cash and the optionality it offers during a volatile period ahead is also a better option.

This Corporate Monitor Report has more details on how the business can be valued. A lot of other information useful for valuation is contained in the Annual Report, especially for the properties.

https://corporate-monitor.org/singapore-...overnance/

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SingPost @ 56 cents

Thanks WJ and valuebuddies for kind sharing again.

I'm also happy with the decision to execute the Aus plan.  In particular, I'm glad that special dividend will be given out. 

In any case, SingPost is not every exciting and I had/did not spend a lot of time researching. 

In my mind, a large company like SingPost will takes a long time to execute it's plan.  Disbursement of Aus business is a major milestone and I do hope that SingPost could step on the accelerator and push ahead on executing it's value-creation plans - for it's shareholders. 

Again, valuebuddies could not imagine how much you had helped me.  Your view had definitely influence and impact my investment plan.

Looking forward to more and wish everyone a Merry Christmas and happy New Year.

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The global economic outlook remains subdued with continued uncertainty arising from geopolitical developments. Nevertheless, the Group is focused on executing its initiatives to maximise shareholder value.

The Singapore business remains focused on leveraging the postal network to drive synergies for the delivery of letter mail and eCommerce volumes. It continues to maintain its high service
standards and is investing in postal infrastructure. The Group is finalising an operating model with the authorities to ensure the long-term commercial viability of postal services, focusing on the optimisation of consumer touchpoints and transition of select post office services to alternate touchpoints.

The global eCommerce logistics market remains challenging with fluctuations in air conveyance costs, post pandemic shifts and geo-political developments, as well as increased competition, leading to significant margin pressures. The Group continues to rationalise and optimise the International business for greater operational efficiency, focusing on its core postal capabilities and leveraging Singapore’s transportation hub status. It is streamlining the regional footprint of
Quantium Solutions and divesting its minority investment holdings of logistics companies in the region.

The outlook for air and sea freight rates remains uncertain due to geo-political developments and continues to have an impact on the International cross-border and freight forwarding businesses. 

The Group continues to explore value unlocking initiatives and is currently evaluating various options, and will make further announcements as and when appropriate.

Enjoy:


Gratitude!