06 February 2014

SingPost - 9M2014 Summary - Feb 2014

Singapore Post released its latest quarterly report yesterday. 

In overall, the group is in the move well to increase exposure to retail and logistics business while maintaining profitability in traditional mail services. You may see the revenue grew at the faster pace (mostly due to consolidation of logistic business) while underlying net profit rose marginally, partly due to higher increase in Operating expenses involved in logistics and retail division. 

Singapore Post recently just announced a strategic decision to acquire a piece of property in Malaysia, in tandem with the plan to expand logistic business to oversea. To me, it would be a good move as it could further increase exposure in oversea market at the same time maintaining its leadership (or in other more aggressive word - monopoly) in domestic market. 

Corporate Finance wise, the company reduced the debt ratio by repaying $300M Bond in April 2013 and enjoyed a good operating cash flow still. Not surprisingly,  the group announced a interim dividend of 1.25c payable on 28 Feb 2014. With expected full year dividend of 6.25c and current shares price of $1.315, it is translated to 4.75% dividend yield. 

In my own opinion, this counter is a defensive counter with lesser volatility (although we do see a fluctuation in between 90 cents to $1.40 in past few years). We could see that the net profit margin would be reduced further as the lower profit margin business (logistics) was growing faster as compared with more mature but higher profit margin business (mail services). The group would need to find a way to battle with the higher holding costs due to the nature of the logistic business itself while exploring alternatives to enhance profitability. 

It could a good idea to add it in your diversified portfolio to add defensiveness especially when uncertainties arise. You could still enjoy a stable dividend income while expecting a lower fluctuation in your overall portfolio. Nonetheless, it is unwise just to invest in single counter in a single time frame.

Below is the snapshot of the summary of the quarterly report which I extracted from company's presentation slides.
Source: Company

Source: Company


Source: Company

Source: Company


Source: Company


Source: Company

Source: Company

Source: Company


Source: Company

Source: Company

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