Singapore Post Limited (SGX: S08) or SingPost is a mail and logistics company, organised into three major segments of Mail/Postal, Logistics, and Retail & eCommerce. Since the beginning of the year, the company’s stock price has surged by 14%.
In this article, we will try to understand what might have caused the surge.
Reasons for price movement
There are many reasons that can cause a stock price to move. Generally, a stock’s price movement is driven either by business performance or investor sentiment.
The former is related to how a business performs in a given period, looking at metrics like growth, margins, production and others. Here, the ultimate driver is profit. The latter is driven more by investors’ overall mood, which is described by emotional pairs such as greed and fear, optimistic and pessimistic, bull and bear, etc.
In the case of the SingPost share price, I believe it’s the former that better explains the surge in share price in the past few weeks.
Here are some figures to justify my point:
Source: SingPost’s third-quarter earnings release
Above is a table from SingPost’s third-quarter earnings release. The company’s financial year ends on 31 March 2018.
Overall, we can see that the latest quarterly revenue and underlying net profit were up by 11.7% and 11.9%, respectively, as compared to the same period last year.
The stronger performance was driven by higher revenue across all three segments. Moreover, SingPost generated free cash flow of S$93.6 million year-to-date, up from a negative S$11.6 million last year, mainly due to a reduction in capital expenditure.
In my opinion, the positive performance recently is likely the main reason that caused the surge in share price.
Going forward, SingPost will continue its multi-year strategy to transform its business to focus more on logistics and e-commerce. It would do so by integrating its various acquisitions.
As such, investors might want to pay close attention to the execution on this front since SingPost’s future share price performance will likely be correlated to the effectiveness of its execution.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.