MENU

How Does Singapore Post Limited Make Money?

It is paramount to know what a particular company does and how it makes money before investing in it. Investing in a business without such knowledge is akin to travelling to an unknown territory without a map.

On that note, let’s check out what business Singapore Post Limited (SGX: S08), or SingPost for short, is involved in and how it generates its revenue.

SingPost, as the name may suggest, is Singapore’s postal service provider. To understand more about the company, let’s take a look at the table below for the revenue contribution of the primary business segments for the financial year ended 31 March 2017 (FY2016/17):

Source: Singapore Post Limited Annual Report 2016/17

The Postal business segment provides services for collecting, sorting, transporting and distributing domestic and international mail. This segment’s operations include the sale of philatelic products, agency services and financial services. It also offers an ePost hybrid mail service, which integrates electronic data communication with traditional mail.

Moving on, the Logistics segment, which brought in the bulk of total revenue for FY2016/17, provides a wide range of logistics solutions. Some of the services offered are freight, warehousing, domestic and international distribution, and delivery services. The subsidiaries under this umbrella include Quantium Solutions (a joint venture between SingPost and Alibaba Group Holding Ltd (NYSE: BABA)), SP Parcels and Famous Holdings.

Last but not the least, the eCommerce segment provides front-end eCommerce solutions. The subsidiaries in this division are Jagged Peak and TradeGlobal.

Singapore Post also provides the revenue breakdown according to geography and whether the revenue is eCommerce-related:

Source: Singapore Post Limited Annual Report 2016/17

As seen from the pie charts, most of the sales for FY2016/17 came from overseas and from eCommerce-related activities.

Now that we know the basics of SingPost’s revenue streams, we can then delve into other aspects of the firm such as its profitability, strength of its balance sheet, its cash-generating abilities and so on before deciding to invest in it.

For (free!) stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.