Taking a Look at the Numbers: Singapore Post Limited

Singapore Post Limited (SGX: S08) has a long history that can be traced back all the way to 1819, the year when Singapore was founded by Sir Stamford Raffles.

For many years, the company’s main business focus was on postal services. But, with the coming of the digital age over the past decade, the company started facing headwinds in its legacy businesses and so, transformed itself.

The company now has three main business segments: Mail, Logistics, and Retail & eCommerce.

Over the past year, Singapore Post’s shares have taken a bit of a tumble, falling by 16% to S$1.64 currently. Given the double-digit decline, let’s look at the company from a value investor’s perspective to see if it could be a bargain right now. For this, I’d be using four metrics: The price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the net-debt to equity ratio, and the dividend yield.

Based on Singapore Post’s latest financials (the 12 months ended 31 December 2015), the company has an earnings per share of S$0.077, giving rise to a P/E ratio of 21.3. This seems to be on the high side when compared to the SPDR STI ETF (SGX: ES3), which has a P/E ratio of 11.4. The SPDR STI ETF is an exchange-traded fund that closely mimics the fundamentals of the Straits Times Index (SGX: ^STI).

Moving on to the P/B ratio, the company has a net asset value per share of S$0.52 (excluding perpetual securities), which indicates a P/B ratio of 3.2. What this means in practical terms is that investors are paying $3.20 for every $1 worth of net assets held by the company at its current stock price.

Looking the company’s balance sheet, Singapore Post has debt of S$361 million on its books and only S$185 million in cash and bank balances. This puts the company in a net-debt position of S$176 million. With ordinary equity of S$1.13 billion, Singapore Post has a net-debt to equity ratio of just 0.16. The net-debt to equity ratio tells us how leveraged a company is and thus gives us an idea of how much financial risk a company is taking on. Singapore Post’s net-debt to equity ratio seems reasonable.

Lastly, we have the dividend yield. Singapore Post has been paying an annual ordinary dividend of S$0.0625 per share in its last nine completed fiscal years. But in the last completed fiscal year (year ended 31 March 2015), the company had also dished out a special dividend of S$0.0075 per share, bringing the total dividend for that year to S$0.07 per share. With that dividend in mind, Singapore Post has a historical yield of 4.3%.

From the four metrics above, it seems like Singapore Post is a mixed bag at its current price. While the company has a very reasonable net-debt to equity ratio and dividend yield, it looks expensive when seen from the perspective of its P/E and P/B ratios. But as Singapore Post is more of a services provider, some of the higher ratios might be acceptable provided the company has stable demand for its services.

All that being said, it should be noted that the above analysis of Singapore Post only serves as a useful starting point for further investing research on the company.

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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 Esjay owns units in the SPDR STI ETF.