How You Can Profit From the Rise of E-Commerce


Lately, it seems that anything related to e-commerce is booming with leaders in that space carrying sky-high valuations – the best example of that would have to be US e-commerce titan Amazon (NASDAQ: AMZN), which trades at a trailing P/E (price/earnings) ratio of more than 500.

There are also other signs of great expectations being heaped onto e-commerce plays. A company like GD Express Carrier in Malaysia, a transportation and logistics outfit that services e-commerce clients, is valued at more than 80 times trailing earnings.

There’s undoubtedly some huge runway for growth ahead for e-commerce. Here’s an example: In 2013, consulting firm McKinsey estimated that in the USA, e-commerce sales accounted for only 8% of total retail sales despite having grown at a clip of 18% a year over the past decade.

But given that there are no significant or prominent e-commerce outfits in Singapore, how can we as retail investors be a part of that growth? Here are two ways.

1. Global Logistic Properties (SGX: MC0)

The company is currently one of the largest owners of modern logistics facilities in China. It is also active in Japan and Brazil. As a provider of logistics facilities, Global Logistic Properties is a key service provider for the e-commerce industry in the countries it’s in.

Although an 18% compounded annual growth rate in e-commerce sales in the USA might seem impressive, China’s numbers are what’s truly staggering. According to some estimates, China’s online retail market has grown at a compounded annual rate of 78% between 2006 and 2012. Research outfit Euromonitor’s figures also corroborates with the general thrust of the story; according to it, online retail sales had grown by 80% and 43% in 2012 and 2013 respectively.

With such incredible growth, it’s perhaps no surprise to know that Global Logistic Properties is still targeting more than US$2.7 billion worth of investments in logistics facilities in China, Japan, and Brazil.

For investors who believe in the future of e-commerce, Global Logistic Properties could be an interesting company to watch. However, the investment would not come cheap: the company carries a forward PE (price/earnings) ratio of 34 at its current price of S$2.75.

2. Singapore Post (SGX: S08)

It might be hard to imagine how Singapore Post, the mail delivery and postage outfit, would evolve into a logistics and retail solutions provider in the region that’s strong enough to attract Alibaba, the China-based e-commerce giant. But, Singapore Post has indeed managed to do so with Alibaba recently buying a 10.35% stake in it for more than S$300 million.

Prior to Alibaba’s investment, Singapore Post was already providing e-commerce-related logistical services for the Chinese outfit. Now, with the investment in place in addition to Alibaba’s push into the Southeast Asia region with its Taobao online marketplace, there’s something to be said for a brighter future for Singapore Post.

Again, the potential for growth with Singapore Post is not a real secret in the market given that it’s currently valued at a forward PE of 25. Shares of the company last changed hands at S$1.75 each.

Foolish Summary

Although Singapore lacks a real leader in e-commerce, we do have strong companies that support the industry. Global Logistic Properties and Singapore Post are just two such companies providing the backbone for this fast growing space.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.