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1 Key Thing Investors Should Know About Singapore Post Limited’s Future

Singapore Post Limited (SGX: S08) is looking to transform its business from its traditional postal services to eCommerce and logistics services.

In a recent investor presentation, Singapore Post had one slide that captured the core components of its business transformation. The firm will be looking to protect its core business, growing into new businesses and unlock value from its existing assets.    

Source: Singapore Post’s earnings briefing

The first component is about protecting its legacy postal business. Singapore Post provides both domestic and international mail services, and to a lesser extent, post office products and services.  

In its latest earnings briefing, group chief financial officer Mervyn Lim provided some insight on what’s ahead for its postal services business:

“The decline in domestic letter mail volumes accelerated in Q1 FY17/18, due to increasing migration towards electronic communication. While the decline is expected to continue, the Group is focused on growing the International mail segment to mitigate the drop in contribution from Domestic mail.”

In the short-term, its postal business could face some headwinds due to changes in the international terminal dues, which are fees that post offices around the world charge one another for international deliveries. Lim said:

“Changes in the international terminal dues system will take effect from 1 January 2018. This will affect not just SingPost but all crossborder eCommerce postal deliveries globally. The impact is being assessed.”

Growth in the international mail business might not fully mitigate the loss in profits at the domestic front. Lim noted:   

“The International mail transhipment market remains highly competitive, and margins are relatively low. With the shift in mix towards lower margin International mail, blended Postal margin is expected to decline.

The Group will continue to focus on improving productivity and efficiency to mitigate margin pressures while maintaining service quality.”

Check back soon for the other components of its transformation strategy.

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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.