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Can This Huge Growth Trend In Singapore Post Limited Continue?

When the name Singapore Post Limited (SGX: S08) is mentioned, the likely image in a Singaporean’s mind would be the snail mail that is delivered daily to our mailboxes.

However, there is more to the business of Singapore Post than just its traditional mail service.

For the financial year ended 31 March 2015 (FY2014/15), Singapore Post’s logistics segment made up a good 42.2% of total revenue. This is a significant increase from the 28% share of total revenue that the segment took up in FY2010/11.

With growth like that, we may want to dig deeper to understand the main drivers.

A deeper look

Singpost Logistics Segment

Source: Singpost’s presentation

From the graph above, we can see that the logistics segment can be further broken down into three major pieces: Quantium Solutions, Famous Holdings, and Others.

Acquired in May 2009, Quantium Solutions is one of Singapore Post’s key initiatives in expanding its presence around the region and increasing its focus around e-Commerce. Notably, in FY2013/14, Quantium Solutions increased its e-Commerce customer count from 300 to over 600.

In February 2013, Singapore Post added freight forwarder Famous Holdings under its umbrella. As you can see from the graph above, the twin acquisitions have contributed significantly to the growth in revenue for Singapore Post’s logistics segment.

But that’s not all. Singapore Post, through its Quantium Solutions and Famous Holdings subsidiaries, has been actively acquiring stakes in other companies such as Couriers Please in Australia, F.S. Mackenzie in the United Kingdom, and Famous Pacific Shipping (NZ) in New Zealand. Singapore Post has also acquired Lock+Stock, a self storage service provider.

Despite all the revenue growth and acquisitions, the operating profit for the logistics division has yet to catch on in a significant way. For now, the mail segment of Singapore Post remains the main profit contributor.

All told, we may want to keep one eye out for future acquisitions in the logistics segment. The other eye though, would have to be focused on the profitability of the segment.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.