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Why Is Singapore Post Limited Sexy Again?

A few years ago, if someone had told me that Singapore Post Limited (SGX: S08) would be a hot commodity, I would have a hard time believing it. Turns out, I would have been wrong.

Singapore Post Limited’s share price has doubled since 2012, attracting the investment of arguably one of the most popular companies globally, Alibaba Group Holding Ltd. The reason for such a revival of interest in the company? Singapore Post becoming the leading e-Commerce logistics service provider in the region.

How did it happen?

Singpost is probably most well-known locally for its business in providing Singapore with a trusted mail service. The company’s strategy has since shifted to protect its core mail and digital services while growing its logistics and eCommerce business. In recent years, the company has been on an acquisition spree, buying up companies in the eCommerce space to gain access into the market.

Through its efforts, the company has been able to raise its e-Commerce-related revenue to 26% of its total revenue. The company’s e-Commerce business includes SP eCommerce, an e-commerce enabler that serve as a platform for brands and retailers with integrated end to end e-commerce solution. It also includes vPOST, one of the largest online shopping and shipping service providers in Southeast Asia.

Has it worked?

Through its investments, the company was able to raise its revenue from S$525.5 million in FY2009/10 to S$821.1 million in FY2013/14. The problem now is that its net profit and free cash flow has hardly moved – both metrics have been stable around S$145 million and S$200 million, respectively, over the same period.

The jury is still out on whether the company is able to translate all the growth in revenue to profits for shareholders in the future.

Foolish Summary

Judging from the price to earnings ratio of 27.3 times, the market seems to be optimistic about the company’s future. With the new investment from the Alibaba Group into the company, many are hoping to see strong strategic collaboration between the two in the near future to expand the eCommerce sector in the region. The next few years will be exciting times for Singapore Post Limited.

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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 does not own any company mentioned above