SingPost reports 20.6% rise in Q3 profit

Consolidation of Quantium Solutions’ income lifts group revenue

SINGPOST turned in a better performance for the December quarter compared to a year ago, which it attributed to an improving economy, government relief measures and the consolidation of a new business, Quantium Solutions.

But its mail and logistics revenues fell, as a result of lower domestic mail and lower Speedpost revenues.

SingPost’s net profit attributable to equity holders for the third quarter ended Dec 31, 2009, improved 20.6 per cent to $44.1 million.

‘In tandem with the turnaround in the economy and with the benefits of the government’s relief measures, we have seen some recovery in the operating performance of the business,’ said Ng Hin Lee, deputy group CEO of SingPost. ‘This, coupled with the consolidation of our regional outfit, Quantium Solutions (formerly known as G3 Worldwide Aspac), enabled us to achieve a healthy set of results.’

Group revenue went up 12.7 per cent to $139.6 million, due mainly to the consolidation of revenue from Quantium Solutions. SingPost said that without the consolidation of Quantium, its revenues would have declined 0.6 per cent.

Its mail revenue dropped by 1.2 per cent to $94.4 million as a result of lower domestic mail and philatelic contributions. Thanks to the consolidation of revenue from Quantium, SingPost’s logistics revenue grew 166 per cent to $49.2 million; without that, its logistics revenue would have declined as a result of lower Speedpost revenue.

The group’s rental and property-related income rose 22.2 per cent to $10.2 million, thanks to higher rentals from its Singapore Post Centre and the leasing of space at the repurposed post office buildings.

Its earnings per share rose to 2.291 cents, from 1.899 cents the year before. And it declared an interim quarterly dividend of 1.25 cents per ordinary share, to be paid on Feb 26.

Going forward, the group said it’s cautiously optimistic about the business outlook and will remain vigilant on cost management.

SingPost said that Singapore was reclassified as a New Target Country, from a Developing Country, by the Universal Postal Union. Its operating costs would now rise due to the increase in its net terminal dues payments for international mailing. SingPost estimates the annualised impact to be around 5 per cent of underlying net profit. It said it has taken and will continue to take active measures to mitigate the effect.

‘It is imperative that we continue to be disciplined in reviewing our operations to improve efficiency and productivity even as we stay vigilant on costs. On the revenue front, we will focus on optimising our resources such as our retail network to achieve better yields,’ Mr Ng said.

SingPost said it’s maintaining its focus on expanding Quantium Solutions’ business beyond crossborder mail and extending its core competencies in the Asia-Pacific.

SpeedPost has a challenger

Yamato launches Ta-Q-Bin service; eyes 50% market share in 10 years

YAMATO Transport is taking SingPost head on in the local parcel delivery segment, launching its Ta-Q-Bin service yesterday as an alternative to the latter’s SpeedPost service.

Muscling in on SingPost’s dominance of the 10 million annual deliveries market, Yamato plans to capture 4 per cent of the pie within the first year and 50 per cent within the next 10 years.

Kaoru Seto, president of parent company Yamato Holdings, said: ‘Yamato aims to achieve annual delivery volume of 400,000 parcels in the first year of Ta-Q-Bin’s operation in Singapore and hopes to increase the number to 8 million parcels in the next 10 years.’

Yamato has invested 3.1 billion yen (S$46.6 million) initially in the new service with five distribution centres – in Ang Mo Kio, Pasir Panjang, Ubi, Penjuru and Anson Road – and some 40 employees and 26 vehicles.

The company expects to take in 201 million yen in revenue in the first year, break even in three years’ time and recover its investments within six years. It expects to be turning over four billion yen from the business within 10 years and is aiming for annual profits of 400 million yen within the same timeframe.

The Ta-Q-Bin service in Singapore will initially start off with three services: basic parcel delivery, chilled and frozen package delivery, and payment on delivery. The latter two services are not offered by current parcel delivery providers, and Yamato aims to price its parcel delivery service very competitively to break into the local market.

Yamato offers a much wider range of services in Japan, which it is working with partners to set up in Singapore as well. These include shopping delivery services, online shopping delivery and maintenance supply services.

Potential partners that it is negotiating with in Singapore are mainly Japanese chains such as Takashimaya, Meiji and Isetan, as well as Cold Storage, said Yamato Transport (S) managing director Naoki Toda. He estimated that it would take 1-2 years to launch these services here.

Other potential areas for growth in Singapore are in the broader business-to-consumer (B2C) market, mail order services and the e-business market, Yamato Transport Co president Makoto Kigawa added.

Yamato is also using Singapore as a springboard to expand into other parts of the region. Potential targets are Malaysia and Thailand, Mr Kigawa said. It is starting a similar service in Shanghai on Jan 18 and will expand to Hong Kong and Beijing from there.

The group plans to invest 10 billion yen on expansion in the region within the next two years. ‘We would like to think of Asean as a whole market,’ Mr Kigawa said.

While reiterating that Yamato’s projections are ‘just an ambition’, he believed that the group has a ‘high chance’ of achieving its 10-year forecast.

Downgrade on valuation grounds

• Singpost’s CEO, Mr, Wilson Tan has stepped down to pursue other opportunities.
• With Dy CEO, Mr Ng Hin Lee taking care of Singpost in the interim, we don’t see any
discontinuity.
• The stock has done reasonably well in the last two months. Downgrade to HOLD for limited
upside.

The departing CEO has achieved what was expected of him. Mr. Wilson Tan joined Singpost in Oct 07 and was expected to focus on regionalization of Singpost’s business. In his 15 months tenure, he is credited with two good acquisitions, which have helped Singpost to expand its business in the region and monetize its intangible assets.

We don’t see any operational discontinuity. Singpost’s board would be actively pursuing the search for a new CEO, while CFO Mr Ng Hin Lee, who was promoted to Dy. CEO role last week, would take care of the company in the interim. We think that Singpost can continue to deliver as many of the strategic initiatives are already in place and execution should not be a problem with an experienced management team at each segment level.

Downgrade to HOLD on valuation grounds. Based on 6% yield (average historical yield), our target price remains unchanged at S$1.05, which translates to 13.5x FY10F PER, still at 10% discount to its average historical PER of 15x. We see potential upside of 3% with 6.5% dividend yield. The stock could be re-rated if (i) Singpost is able to grow its regional business through acquisitions further, or (ii) Singpost can monetize its HQ building.

SingPost looking for new group CEO

SINGAPORE Post Ltd (SingPost) is on the lookout for a new group chief executive officer (GCEO) as current GCEO Wilson Tan has resigned.

Mr Tan, who is leaving SingPost ‘to pursue other opportunities’, will also step down as director of the board. His last day at SingPost will be April 3.

Just last week, SingPost announced it was appointing its chief financial officer Ng Hin Lee as deputy group CEO. Mr Ng, who concurrently remains CFO, officially began his term as deputy group CEO yesterday.

If a suitable candidate is not selected by April 3, Mr Ng will assume the duties of group CEO until a replacement is found.

Mr Tan, who came on board in October 2007, has contributed towards SingPost’s transformation as it diversified from a postal services provider to a mail, logistics and retail solutions provider in the region, SingPost said in an announcement to the Singapore Exchange (SGX) yesterday.

It was also under his helm that SingPost acquired Quantium Solutions International (formerly known as G3 Worldwide Aspac) and US-based Postea Inc, which is expected to bolster SingPost’s regional growth and expansion.

Mr Tan said: ‘It is gratifying to see SingPost develop from strength to strength and indeed to be part of its exciting transformational journey. The postal and logistics landscape has been evolving in tandem with changes in customers’ lifestyles, and SingPost has been adapting and reinventing itself to stay relevant to its customers.’

SingPost chairman Lim Ho Kee added: ‘On behalf of the board, I wish to register our appreciation to Wilson for his invaluable contributions and leadership, especially under the difficult and challenging environment of the past year.’

For the second quarter ended Sept 30, 2009, SingPost chalked up a net profit of $40.5 million, up 8.3 per cent from the previous corresponding quarter. Without the amortisation of deferred gain (which relates to the collaboration with Postea), the government’s Job Credit Scheme and other one-off items, the group’s underlying profit fell 8.6 per cent to $35.4 million.

Group revenue – which was strengthened by the consolidation of revenue from Quantium Solutions Group – increased 7.9 per cent to $130.3 million.

SingPost appoints CFO as deputy CEO

SINGAPORE Post (SingPost) has announced the appointment of Ng Hin Lee, its chief financial officer (CFO), as deputy group chief executive officer with effect from Monday.

Mr Ng, who joined SingPost in 2006, will concurrently hold the functions and responsibilities of the CFO. The move comes as SingPost plans to boost its presence overseas.

The group said Mr Ng was responsible for the successful conclusion of the Postea deal in which SingPost took a 30 per cent stake in the US-based postal and logistics technology solutions company. He also played a major role in the full acquisition of its then joint-venture G3 WorldWide Aspac which has since been renamed Quantium Solutions International.

Said Wilson Tan, group CEO of SingPost: ‘With Hin Lee’s more than 20 years of leadership experience, in particular in the area of corporate finance, he will play a key role in SingPost’s regional expansion plans.’

SingPost said since its listing in 2003, it has been strengthening its management bench through the infusion of new talent, succession planning and organisational changes to support the company’s growth and expansion plans.

SingPost’s mail business will continue to be headed by executive vice-president Woo Keng Leong, a veteran with 30 years of postal experience. Its retail and financial services is led by executive vice-president Loh Choo Beng while its logistics business is managed by vice-president Raymond Huang.

SingPost’s wholly-owned subsidiary, Quantium Solutions International, is helmed by executive vice-president Teo Yew Hwa.