Singapore Post Ltd
SGX:S08
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
0.38
0.565
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SGD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Singapore Post Ltd
You don't have any saved screeners yet
Ladies and gentlemen, thank you for holding. We are now ready for the briefing.
I shall now hand over to the management of SingPost to begin the briefing.
Hi, good morning, everyone. Welcome to SingPost's results briefing for the third quarter and 9 months of FY '2017/'18. My name is Jason from Investor Relations. With me today is our Group CEO, Paul Coutts; as well as our Group CFO, Mervyn Lim.
For now, I hand over the session to Mervyn to run through the slides.
Thank you, Jason. Good morning, everyone, and welcome to our results briefing.
In Q3 FY '17/'18, revenue rose 11.7%, led by growth across all 3 segments, driven by higher eCommerce-related activities. Rental and Property-related income grew 52.9% boosted by the rental income from SingPost Centre retail mall which opened in October 2017. Net profit rose 37.2%, driven by improved performance from the Postal, eCommerce and Property segment as well as a one-off adjustment of deferred tax. Excluding exceptional and one-off items, underlying net profit rose 11.9%.
Allow me to now share some highlights of the group's revenue performance for the quarter. In the Postal segment, revenue rose 15.8% as international mail revenue for the quarter rose 37.7% year-on-year and crossed $100 million for the first time, driven by cross-border eCommerce deliveries.
Logistics revenue increased 1.5% due to increased last-mile deliveries across Singapore and Australia and higher freight forwarding volumes. This was partially offset by lower revenue from Quantium Solutions Hong Kong. eCommerce revenue grew by 19.7%, with strong growth in U.S. eCommerce revenue, led by higher volumes and new customers.
Operating expenses rose 14.7% as the group seeks to grow volumes to benefit from economies of scale from operating leverage.
Labor and related expenses rose due to higher temporary and contract staff costs to support growth in the business.
Volume-related expenses rose 13.9% attributed to higher international mail terminal dues and air conveyance costs in line with higher volumes.
Admin and others increased due to higher professional fees.
Depreciation and amortization expenses were higher mainly due to higher equipment depreciation costs at the Regional eCommerce Logistics Hub and shortening of amortization period for intangible assets of TradeGlobal.
Finance expenses rose mainly due to unfavorable non-trade-related foreign exchange translation differences.
We now share some highlights for the group's operating profit before exceptional items. Postal operating profit rose 4%, driven by higher operating profit for international mail on the back of higher cross-border eCommerce deliveries, including collaboration with the Alibaba Group for the Double Eleven event in November.
Logistics operating profit declined to $4.9 million due largely to an increase in line haul and handling costs as well as lower contribution from Quantium Solutions.
In eCommerce, operating loss narrowed as TradeGlobal executed in line with the turnaround business plan and delivered good cost controls over the peak season.
Our Property operating profit rose 51.8%, with rental income from SingPost Centre retail mall. The others category comprises largely unallocated corporate overhead and trade-related foreign currency translation differences, and this narrowed from negative $7.6 million to negative $5 million.
In this slide, we show the movement in underlying net profit, which was up 11.9% to $35.2 million. This was led by higher contributions from the eCommerce, Property and Postal segments.
Our share of results from associates and joint ventures also rose. The improved performance in these segments was partially offset by a decline in the Logistics segment and from higher net finance expenses.
For the 9 months, revenue rose 9.5%. Underlying net profit declined 4.8% due largely to lower operating profit in the Logistics segment.
Let me now move to the cash flow and the balance sheet. Cash flow from operating activities was largely stable for 9 months FY '17/'18. Capital expenditure was lower at $52.9 million, with the completion of the Regional eCommerce Logistics Hub and SingPost Centre retail mall. As such, free cash flow improved to $93.6 million.
Cash flow for financing activities included a net repayment of short-term bank loans of $127.7 million in 9 months FY '17/'18. As a result, cash and cash equivalents decreased by $82.3 million during the period.
We now move to the balance sheet and the financial indicators. Our cash and cash equivalents stood at $284.3 million at December 31, 2017. Borrowings declined to $235.3 million, with a partial repayment of short-term bank loans. The group was in a net cash position of $49 million as at December 31, 2017. Our interest coverage remains strong at 24.6x.
We will now move on to the segmental results. Postal revenue rose 15.8%. International mail revenue rose 57.7%, as quarterly revenue crossed $100 million for the first time. This helped offset the decline in domestic mail revenue.
Operating profit rose 4% as higher international mail operating profit helped offset the decline in the domestic mail business.
The revenue trends for 9 months are similar to that for Q3. In 9 months, although international mail operating profit rose, this was not sufficient to offset the impact of the decline in domestic mail operating profit. Consequently, Postal operating profit declined marginally.
Logistics revenue increased 1.5% in Q3 as SP Parcels and Couriers Please's revenue rose with increased last-mile delivery volumes in Singapore and Australia, respectively, while Famous Holdings' revenue grew in line with higher freight forwarding volumes. These were partially offset by a revenue decline at Quantium Solutions, which continues to face competitive pressures in its Hong Kong operations. This negated the improved performance in Singapore from higher utilization at the Regional eCommerce Logistics Hub.
Operating profit declined 44.8%, which reflects an increase in line haul and handling costs as well as lower contribution from Quantium Solutions.
The revenue trends for 9 months are similar to that for Q3.
For 9 months, operating profit declined 76% as it included a doubtful debt provision in Q2 for a key customer.
In the eCommerce segment, revenue increased 19.7% in Q3.
Jagged Peak revenue rose 43.9% as volume surged over the U.S. peak shopping season of October to December, while TradeGlobal overcame the loss of revenue from 2 major customers, as previously disclosed, and grew revenue marginally in Q3, aided by the addition of new customers.
Operating losses narrowed significantly by 55.4% as TradeGlobal performed largely in line with the turnaround business plan and delivered good cost controls over the peak season in Q3.
For 9 months, revenue rose 7.1%, while operating losses narrowed by 41.9% as TradeGlobal continues to execute on the turnaround business plan.
Next, we will go through some business and corporate updates. SingPost announced new international airmail rates for Small Packets from 2nd January 2018. This serves to better track the costs associated with the processing and delivery of packets and reflects the rise in international postal settlement rates between countries.
International postal settlement rates, which determine what SingPost compensates other postal organizations for mail delivery in their country, were raised on 1st January 2018, by the Universal Postal Union, or UPU.
For Q3, eCommerce-related revenue rose 26.4% year-on-year, driven by higher eCommerce deliveries across our network such as International, Postal and shipment and local parcel deliveries.
ECommerce-related revenues now represent 60% of total group revenue.
Next, I shall share some key operating indicators. At the Regional eCommerce Logistics Hub, our utilization for the warehousing floors stood at 87%. For the parcel sorting machine, average daily utilization during the December quarter was 21%. During the peak season, we processed up to 33,000 parcels a day. For the SingPost Centre retail mall, committed occupancy stood at 85.9% as at 31st December 2017, up from 80.4% as at 30th September 2017.
Allow me to now summarize.
In Q3 FY '17/'18, revenue rose 11.7%, with growth across all 3 business segments. Underlying net profit rose 11.9% year-on-year, largely due to higher operating profit from Postal, narrowing operating losses in eCommerce and improved contribution from Property. Free cash flow improved from lower capital expenditure. Net cash position also improved year-on-year to $49 million as at 31st December 2017. The board has declared an interim dividend of $0.005 per share, and this will be paid on 28th February 2018.
That ends my presentation. Thank you.