Singapore Post Limited’s Latest Earnings: What Investors Should Know

Last Friday, Singapore Post Limited (SGX: S08) reported its third quarter earnings for the fiscal year ending 31 March 2017 (FY16/17). The reporting period was for 1 October 2016 to 31 December 2016.

As a quick introduction, Singapore Post is primarily in the business of providing mail and logistics services. Most Singaporeans should be familiar with the company’s namesake mail service. Its business is currently organized into three major segments: Postal, Logistics, and eCommerce.

You can read more about the company in here or catch up with the results from the previous quarter here.

Financial highlights

The following’s a quick take on some of Singapore Post’s latest financial figures:

  1. Revenue for the third quarter rose 16.8% year-on-year to S$369.4 million.
  2. Profit attributable to shareholders came in at S$31.4 million, down 27.9% from the same quarter a year ago.
  3. Underlying profit (which adjusts for one-off items) for the third-quarter of FY16/17 fell 28.2% year-on-year to S$31.4 million.
  4. Earnings per share (EPS) for the third-quarter was 1.28 cents per share, down from the 1.84 cents recorded in the same quarter a year ago.
  5. For the reporting quarter, cash flow from operations came in at S$52.6 million with capital expenditure weighing in at S$48 million. The lower capex put the logistics outfit into positive free cash flow territory to the tune of S$4.6 million. In the same quarter a year ago, Singapore Post had negative free cash flow of S$9.2 million (S$50.0 million in cash flow from operations and S$59.2 million in capex).
  6. As of 31 December 2016, Singapore Post had S$229.1 million in cash and equivalents and borrowings of about S$414.9 million. This is a decline from the S$185.1 million in cash and equivalents and borrowings of about S$361.1 million recorded on 31 December 2015.

Singapore Post demonstrated solid top-line growth in its reporting quarter but its underlying profit fell by almost 30%. The company also maintained a net debt position. On the flipside, Singapore Post managed to get itself back to positive free cash flow territory.

The board of directors recommended an interim dividend of 0.5 cents per share for the quarter, a 67% decrease from the interim dividend of 1.5 cents per share paid a year ago.

Operational highlights

The eCommerce segment led the way in revenue gain for the reporting quarter. The segment recorded S$81.1 million in revenue, more than doubling over the same quarter in FY15/16. The growth was supported by the segment’s US acquisitions, namely TradeGlobal and Jagged Peak.

The Logistics segment saw sales expand 5.6% from S$162.2 million in the third quarter of FY15/16 to S$171.3 million in the reporting quarter. The growth came from increased volumes on its network.

The Postal segment manged to eke out a 2.9% revenue increase to S$139.3 million over the corresponding quarter in the previous fiscal year.

In terms of operating profit, the picture was not as encouraging. The Logistics segment’s operating profit was down 30.2% due to pricing pressures and additional costs from the Regional eCommerce Logistics Hub, which obtained TOP (temporary occupation permit) in April 2016. The Postal segment’s operating profit declined by 6.6% due to lower domestic mail volume. Elsewhere, the eCommerce segment logged a negative operating profit of S$8.4 million.

Mervyn Lim, Singapore Post’s interim chief executive, shared the following comments in the earnings release regarding the company’s reporting quarter:

“We are building out our capabilities, broadening and deepening our eCommerce logistics network, to secure the future of SingPost. There are challenges along the journey and it is going to take a number of years for our investments to contribute.”

Singapore Post also cautioned that TradeGlobal’s performance has not been up to mark so far. The board thus thinks there is a “risk of significant impairment” of TradeGlobal’s value on Singapore Post’s balance sheet after its performance for the whole of FY16/17 is assessed. For context, TradeGlobal was acquired for US$169 million on October 2015.

At their opening price of S$1.47 each today, Singapore Post’s shares trade at 16.8 times trailing earnings and a trailing dividend yield of 5%.

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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.