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What Investors Should Know About Singapore Post Limited’s Growth Strategies

On Friday morning, Singapore Post Limited (SGX: S08), or SingPost, announced its financial results for the third quarter ended 31 December 2017.

Revenue for the quarter rose 11.7% year-on-year to S$412.8 million on the back of broad-based growth across its business segments. Meanwhile, net profit surged 37.2% to S$43.0 million, on the back of improved performance in the postal, eCommerce and property divisions. A one-off adjustment of deferred tax due to changes in the US corporate tax rate helped to prop up the bottom line as well.

The postal outfit released its outlook and plans for the future during the earnings release as well. Let’s take a quick look at them.

Postal

SingPost said that the decline in domestic letter mail volumes is expected to continue. In the latest quarter, revenue from local mail fell 7% year-on-year with the continued migration towards electronic statements and bills by companies.

The international mail segment, however, saw its revenue grow 37.7% to cross the S$100 million mark for the first time. Going forward, the focus will be on growing the international mail segment to mitigate the fall in contribution from domestic mail.

It also added:

“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.”

Logistics

SingPost said that it would continue to drive traffic and volumes onto its eCommerce logistics network and improve the utilisation of existing infrastructure. It also said that it would rationalise and integrate its businesses across different regions and maximise the potential of its investments.

However, it warned that it “will take time for the Logistics segment to grow its profit contribution while it executes on its plans”.

eCommerce

Moving on, for the eCommerce space, SingPost had the following outlook:

“In eCommerce, the Group has acquired technologies, customers and market knowhow which enables SingPost to scale its integrated solutions by offering an omni-channel experience that will drive volumes onto its logistics network.

TradeGlobal is executing on a turnaround business plan. While business and cost initiatives are being put in place to improve performance, TradeGlobal is not expected to be profitable for the financial year ending 31 March 2018.”

This segment could be a huge growth driver of the group with the proliferation of online shopping.

Property

The new SingPost Centre located near Paya Lebar MRT Station opened for business in October 2017 after two years of redevelopment.

For the latest quarter, due to rental income from the retail mall, operating profit for the property segment surged 51.8% year-on-year. As at 31 December 2017, the committed occupancy at the shopping centre was 85.9%. SingPost said that the rental income is “expected to improve Property income contribution” going forward.

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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 Sudhan P doesn’t own shares in any companies mentioned.