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9 Quick Things Investors Should Learn About Singapore Post Limited From Its Management

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

In early August this year, Singapore Post released its results for the first-quarter of its financial year ending 31 March 2017 (FY16/17). I had spent time going through the webcast of Singapore Post’s earnings presentation and noted down nine things that may interest investors.

As a quick background, Singapore Post provides mail as well as logistics services. The company’s business is organised into three major segments: Postal, Logistics, and eCommerce.

With that, here are my notes:

  1. Singapore Post’s chief financial officer, Mervyn Lim, highlighted a few key points for the quarter. He said that the company’s revenue had increased 30.9% year-on-year, driven by continued growth in cross border activities and acquisitions. But, operating profit fell 14.5% while net profit was down 23% year-on-year. Lim said that last year’s profit included gains from one-off divestments. To be sure, underlying profit was down 11.2% due to investments related to business transformation. Lim said that underlying profit represents the recurring revenue for Singapore Post.
  2. Next on the list was the performance of the different business segments. Lim noted that the traditional Postal segment’s revenue was up 1.5% despite the divestment of Novation Solutions and Datapost. Growth came from international mail revenue. For the Logistics segment, Lim said that sales grew by 11.9% from organic growth from Quantium Solutions and Couriers Please. For the eCommerce segment, Lim said that revenue was up 740.6% from the consolidation of TradeGlobal and Jagged Peak.
  3. Singapore Post also saw expenses increase by 33.6% year-on-year. Lim said that this was driven by volume-related expenses and additional headcount from new subsidiaries. Lim also took time to elaborate on the 50.5% increase in volume-related expenses. Majority of the increase came from outsourced services (engaged by Couriers Please and Jagged Peak), which rose by 91.5%.
  4. Lim also noted that the underlying operating profit for the Logistics and Postal segments were both up for the quarter. However, the loss of rental income from the redevelopment of SPC mall and higher operating losses at eCommerce dragged down Singapore Post’s overall underlying profit.
  5. Lim said that the company’s borrowings rose to $367.6 million, up from $280.3 million a year ago, due to higher committed capital expenditure. Singapore Post’s EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense ratio remained comfortable at 30.2 times. The company’s net debt to total equity ratio stands at 10.9%.
  6. Lim said that Singapore Post’s eCommerce related revenue grew at a good pace. He said that eCommerce related revenue represents 49.3% of the group’s revenue in the first quarter of FY16/17. The postal segment contributed 31% of eCommerce-related revenue, while the eCommerce segment contributed 40% and the logistics segment contributed 29%.
  7. Geographically, Lim said that overseas revenue represents 50.2% of total group revenue. US made up 34% of overseas revenue, Australia came in with 28% while Asia and Europe pitched in with 27% and 11% respectively.
  8. Lim added that there are changes made to the classification of the business segments. Postal segment comprises the core postal business of the entire group. The postal segment’s growth came from its international mail sub-segment, which grew by almost 30% year-on-year for the fiscal first quarter.
  9. The logistics segment will include Quantium Solutions, Famous Holdings, Couriers Please, SP Parcels, and other logistics entities. The sub-segment enjoyed an 11.9% revenue increase. Couriers Please and Quantium Solutions each posted organic revenue gains of 14.8% and 7.7%, respectively. Famous Holdings’ revenue was up 20.2% from a new subsidiary added under its umbrella. Finally, TradeGlobal and Jagged Peak accounted for the majority of the revenue spike at the eCommerce 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.