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Singapore Post

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Post Pandemic Recovery

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Singapore Postal Services dated back to 1819 and was merged with Telecommunication Authority of Singapore in 1982. In late 1980s, telecommunication was privatised. Singapore Post was incorporated in 1992. The company is in the business of:

  • Domestic and international postal & parcel services

  • Logistics comprising freight forwarding and e-commerce, warehousing, delivery & fulfilment

  • Property comprising commercial rental property and self-storage business.

The company exit from U.S. Business in FYMar19 when TradeGlobal and Jagged Peak filed for Chapter 11 in the United States.

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Singapore and Australia are the main bases SingPost operate from, while Others include warehousing & logistics in Japan and Hong Kong and freight forwarding in Europe & New Zealand.

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Financial (FY-March)

Revenue growth peaked in FY19 at $1.56B. Absent TradeGlobal and Jagged Peak de-consolidated from balance sheet, revenue fell. Underlying Postal & Parcel and Property businesses declined marginally and Logistics grew 3% in FY20 and 22% in FY21 amidst pandemic. Revenue mix are as follows:

  • Postal & Parcels - 51.4%

  • Logistics - 43.3%

  • Property - 5.3%

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Gross margin had been declining from 48.9% in FY04 to about 19% in FY20. Further tapering in FY21 is partly due to COVID-19 impact.

SingPost had been able to reduce their expenses from 18.5% in FY04 to 8.4% in FY21, resulting operating margin stabilising since FY17. The drop-off in FY21 is due to pandemic as mentioned.

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Risk

The company balance sheet have weakened considerably over the decade due to emergence of e-Commerce which impacted Postal & Parcels business immensely.

Poor acquisition decisions on TradeGlobal and Jagged Peak were other reasons for the company rising risk profile. 

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Opinion

Logistics business which is growing rapidly appear to be turning around. Substantial increase in revenue is not accompanied by rising margin. Without transportation assets, cost is variable and dependent on market rates.

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Property rental business remained steady but social distancing and shift towards work from home could provide some headwind. Presently, do not envisage earning growth rate to be significant. 

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Postal & Parcel is a key catalyst for the company. A successful repositioning of this business to increase margin is a key success factor.

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