9 Useful Quick Things Investors Should Learn About Singapore Post Ltd

Singapore Post Limited (SGX: S08) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations (the link for Singpost is here).

The mail-service carrier needs no introduction, as it should be well-known to Singaporeans. Beyond the Mail business segment, Singapore Post divides its businesses into the Logistics as well as Retail & eCommerce segments.

You can read more about the company in here.

Mailing in growth?

Below are nine useful things I had learned from listening to Singapore Post’s second-quarter earnings webcast for the financial year ending 31 March 2016 (FY15/16):

  1. Newly elected chief financial officer, Mervyn Lim, highlighted a few key points for the reporting quarter:
    • Total expenses grew by 26.5% year-on-year, increasing at a faster rate than revenue growth, which jumped by 20.1%. The higher expenses was due to Singapore Post’s continuing effort to transform itself into a regional leader in ecommerce logistics.
    • Elsewhere, Singapore Post recorded one-off gains from the disposal of Novation Solutions and Datapost Hong Kong. The one-off gains led to net profit rising 26.9% year-on-year. However, underlying profit (which strips away one-off gains) only inched up by 1.4%.
  2. The divestment of Novation Solutions and Datapost led to Singapore Post’s Mail segment recording a 2% decline in revenue for the first-half of FY15/16 ,when compared to the same period a year ago. Excluding the divestment, revenue at the Mail segment would have been unchanged.
  3. In contrast, acquisitions and growth in the eCommerce-related businesses led to the Logistics segment posting a 43.5% year-on-year spike in revenue in the first half of the fiscal year. Much of the growth was driven by the segment’s Quantium Solutions and Famous Holdings sub-segments.
  4. Operating cash flow for Singapore Post was negative for the quarter due to one-off merger and acquisitions (M&A) fees and changes in working capital. This line item is worth observing in future quarters.
  5. The negative operating cash flow and investments left a mark on Singapore Post’s balance sheet. The company recorded a net cash position of $87.8 million for the reporting quarter, a hefty decline from the net cash position of $345.8 million seen in 31 March 2015. However, EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense still remained comfortable at 40.6 times.
  6. Singapore Post also shared information on the revenue split between eCommerce revenue and non-eCommerce revenue. For the first-half of the fiscal year, the firm recorded $150.1 million in eCommerce related revenue, up 29.3% year-on-year. The eCommerce piece made up around 29% of total revenue for the first half of FY15/16.
  7. The Mail segment and Logistics segment were major contributors to eCommerce related revenue. Of the aforementioned $150.1 million, the Mail and Logistics segments made up 45% and 44%, respectively, of the overall pie. The majority of the Mail segment’s eCommerce revenue came from international shipments. Meanwhile, the Logistics segment’s eCommerce contribution came from Quantium Solutions and Singapore Parcels.
  8. From a geographical standpoint, Singapore Post is also seeing increasing contribution from overseas revenue. For the first-half of the fiscal year, overseas revenue made up 39.5% of overall revenue. This represents a growth of 58.2% over the first-half of the last fiscal year. The overseas business is mainly driven by Quantium Solutions and Famous Holdings, which are housed under the Logistics segment.
  9. Wolfgang Baier, Singapore Post’s chief executive, took time to round up the highlights for the first half of the fiscal year:
    • On 28 October 2015, Singapore Post had announced the development of a retail mall at Singapore Post Centre (SPC). This is planned for completion in mid-2017. Singapore Post plans to double the retail gross floor area. Baier commented that the disruptive concept will converge both online and offline services for the benefit of customers.
    • Singapore Post is also dipping its toes into mail and parcel delivery by drones in a joint development with the Infocomm Development Authority of Singapore (IDA). Baier said that Singapore Post had recently performed the first secure last mile and packet drone flight delivery.
    • Singapore Post is gearing up for the next phase of accelerated growth, dubbed SingPost 3.0. Baier outlined nine key pillars for SingPost 3.0, which includes defending its postal business, while transforming itself into a global freight and eCommerce logistics player.

Foolish takeaway

To buy and hold a company’s shares for the long-term also means keeping up with its developments.

The access to management teams via webcasts and transcripts gives the Foolish investor a fair chance to judge whether they would like to be invested alongside those teams. It also helps us put together a more complete thesis around a company and keep up with developments in its industry.

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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.