Shares of Singapore Post Limited (SGX: S08) have declined by over 23% since the start of 2016. Singapore Post is moving away from its traditional postal services to become a logistics and eCommerce services provider. But the change has not come easy. In the fourth quarter of its fiscal year ended 31 March 2017 (FY16/17), the company took a $185 million impairment on its 2015 acquisition of TradeGlobal. This led to an 87% fall in Singapore Post’s profit for FY16/17. The charge was taken after TradeGlobal failed to meet the company’s…
Shares of Singapore Post Limited (SGX: S08) have declined by over 23% since the start of 2016.
Singapore Post is moving away from its traditional postal services to become a logistics and eCommerce services provider. But the change has not come easy.
In the fourth quarter of its fiscal year ended 31 March 2017 (FY16/17), the company took a $185 million impairment on its 2015 acquisition of TradeGlobal. This led to an 87% fall in Singapore Post’s profit for FY16/17. The charge was taken after TradeGlobal failed to meet the company’s growth expectations. Fortunes did not improve in the first quarter of FY17/18. Singapore Post posted a 23.2% decline in operating profits.
But amid the gloomy clouds lies a silver lining.
1. The AliBaba Effect – click here
2. SPC retail mall coming online
For FY16/17, Singapore Post recorded a 7.1% fall in rental and property related income.
The main reason behind the fall was the loss of income from the SPC (Singapore Post Centre) Retail Mall. The property was earmarked for development in the third quarter of FY15/16. In its original announcement, Singapore Post laid out the vision for the SPC Retail Mall:
“The new retail mall at Singapore Post Centre (SPC) will offer greater convenience, choices and experiences to consumers by providing online e-merchants and offline brick-and-mortar shops all under one roof. Online shopping through e-merchants will include in-shop online ordering and flexibility in delivery and pickup timings.”
During its fiscal fourth-quarter briefing, chief financial officer Mervyn Lim, noted the loss of rental income but said that the loss will be temporary:
“In the Property & Others segment, we have a temporary loss of rental income as we redevelop SPC retail mall, which will almost double our retail space when completed.”
The new mall is expected to open with a net leasable area of 175,000 square feet. Furthermore, the opening of SPC retail mall is just around the corner. Lim said:
“The retail mall at the new SingPost Centre is expected to open in the second half of the year. SingPost has appointed CapitaLand as the retail mall manager which will help optimise returns from this asset. The Group will begin to progressively recognise rental income from the second half of FY2017/18 onwards.”
Singapore Post incurred some pre-opening expense during the first quarter. The SPC Mall is expected to open its door in October. In the fiscal first quarter, Lim sounded a positive note:
“…. we are on track in terms of driving up the occupancy levels towards our opening in October of this year. As you know, Capitaland has been appointed as our retail mall manager and we are on target towards a good opening in October.”
As it stands, we do not have figures on how much revenue and profits the new mall will bring for Singapore Post. With all the challenges that the postal firm is facing, the opening of the mall could be something good to look forward to.
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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.