SGX Yield Stock

A faint light at the end of the tunnel

Key Meeting Takeaways

• SingPost’s pace of acquisitions appears to be picking up but so far, none of them has been game‐changing enough for the stock to pop back on the radar. However, the group is certainly following through on its strategy of entering more non‐mail markets and expanding its regional wing. The question is how big an impact will these investments have on earnings and how soon? Only less than $30m has been invested since $200m was raised early last year, and it is perhaps too early to expect tangible results. For now, we reckon its slightly above‐sector valuations have already factored in expectations of earnings‐accretive acquisitions.

Our View

• It has been a year since SingPost raised $200m in early 2010 and the crawling pace of realising its strategy of entering non‐mail businesses and expanding outside the growth‐starved domestic market is picking up slightly. It only recently purchased a 22% stake in Malaysian courier GD Express for RM45.5m, took control of hybrid mail subsidiary DataPost for S$6m and boosted its e‐commerce team for S$0.2m.

• It has also hired an ex‐McKinsey consultant, Dr Wolfgang Baier, to accelerate regionalisation and diversification. Dr Baier has international experience in logistics and is familiar with SingPost, having worked with the group while at his old company. He will take over some key functions from Deputy Group CEO Ng Hin Lee, who has also borne the group finance portfolio since ex‐CEO Wilson Tan left a year ago.

• To‐date however, none of SingPost’s investments has had tangible results as they were only acquired this year. Quantium, which was fully acquired in 2009, has not had a good year either, as profitability was lower on higher operating expenses. Ironically, the “boring” mail business (operating profit +8.5%) did better than the business it is trying to expand into. Logistics operating profit fell 5% in FY11.

A faint light at the end of the tunnel

Key Meeting Takeaways

• SingPost’s pace of acquisitions appears to be picking up but so far, none of them has been game‐changing enough for the stock to pop back on the radar. However, the group is certainly following through on its strategy of entering more non‐mail markets and expanding its regional wing. The question is how big an impact will these investments have on earnings and how soon? Only less than $30m has been invested since $200m was raised early last year, and it is perhaps too early to expect tangible results. For now, we reckon its slightly above‐sector valuations have already factored in expectations of earnings‐accretive acquisitions.

Our View

• It has been a year since SingPost raised $200m in early 2010 and the crawling pace of realising its strategy of entering non‐mail businesses and expanding outside the growth‐starved domestic market is picking up slightly. It only recently purchased a 22% stake in Malaysian courier GD Express for RM45.5m, took control of hybrid mail subsidiary DataPost for S$6m and boosted its e‐commerce team for S$0.2m.

• It has also hired an ex‐McKinsey consultant, Dr Wolfgang Baier, to accelerate regionalisation and diversification. Dr Baier has international experience in logistics and is familiar with SingPost, having worked with the group while at his old company. He will take over some key functions from Deputy Group CEO Ng Hin Lee, who has also borne the group finance portfolio since ex‐CEO Wilson Tan left a year ago.

• To‐date however, none of SingPost’s investments has had tangible results as they were only acquired this year. Quantium, which was fully acquired in 2009, has not had a good year either, as profitability was lower on higher operating expenses. Ironically, the “boring” mail business (operating profit +8.5%) did better than the business it is trying to expand into. Logistics operating profit fell 5% in FY11.