Singapore Post Ltd
SGX:S08
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Singapore Post Ltd
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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. Thank you. Please go ahead.
Good morning, everyone. Welcome to SingPost Results Briefing for the Third Quarter and 9 Months of FY '19/'20. My name is Jason from Investor Relations. With me today is our group CEO, Mr. Paul Coutts; Group CFO, Mr. Richard Lai; and CEO of Postal Services in Singapore, Mr. Vincent Phang.
Before we start the session, I'd just like to reiterate what we shared last quarter. With Jagged Peak and TradeGlobal having filed for relief under Chapter 11 of the U.S. bankruptcy code, the group had deconsolidated their financials. The income statement is now presented as continuing operations which excludes the U.S. subsidiaries. Losses on the U.S. subsidiaries for the period prior to deconsolidation are presented as a single line item called discontinued operations.
Let me just start the presentation. Revenue for Q3 FY '19/'20 was lower by 2%. In spite of record revenue of close to $150 million for international post and parcel, this was insufficient to offset the decline in domestic letter mail as well as lower freight forwarding revenue from a slowdown in global trade. Consequently, profit on operating activities declined 24.6%. Share of associated companies and JV was
[Audio Gap]
and disposed of our stake in Indo Trans Logistics.
Under exceptional items, we had a gain last year of $31.8 million, which was largely due to gain on dilution of interest in 4PX, partly offset by fair value losses on GD Express borrowings. Loss from discontinued operations was 0 as we had deconsolidated the U.S. subsidiaries. In Q3 last year, the U.S. subsidiaries incurred a $12.8 million loss. Without these items this financial period, net profit attributable to shareholders declined 39.3% to $30.5 million. Excluding exceptional items, underlying net profit declined by $1.7 million to $31.2 million. The absence of losses from the U.S. subsidiaries compared to the same period last year was offset by lower profit for Post & Parcel due to lower domestic letter volume.
Let me now move on to expenses. Despite benefits delivered by our cost savings actions taken in anticipation of a declining mail environment, operating expenses rose 3.5% due to significant investments to improve service levels as well as the impact of higher terminal dues for the international postal business.
Labor and related expenses rose 3.9% with additional postmen hired for the Singapore postal operations as well as higher remuneration for the postmen. From 1st April 2019, the group adopted SFRS 16 as required by accounting standards. It involves putting leases onto our balance sheet. There is a reduction of rental costs under admin and others, an increase in depreciation costs as well as an increase in finance expenses.
Largely, as a result of the above, admin, selling and other expenses declined 13.2% to $29.7 million. Depreciation and amortization expenses rose 75.3% to $16.9 million, and finance expenses rose to $3.1 million from $2.1 million -- $2.3 million in Q3 last year.
Let me now move on to the overview of the various segments' contribution to group revenue and profit on operating activities. The Post & Parcel segment remains the largest contributor to group revenue followed by the Logistics segment. For profit on operating activities, Post & Parcel is the largest contributor followed by the Property segment. The Logistics segment turned from a $0.5 million profit to a $0.7 million operating loss position partially due to losses at CouriersPlease in December, which was impacted by the bushfires in Australia. We will provide more details on the performance of each of the segments in the next few slides. Under the Others segment, expenses rose to $9.9 million from $7.1 million in Q3 last year largely due to a one-off settlement of professional fees and higher provision for doubtful debt.
Let me now move on to the cash flow and financial indicators. For the 9 months ended 31st December 2019, operating cash flow before working capital changes was $160.3 million, partially stable compared to $159.0 million last year. Working capital movement for 9 months was negative $65.9 million due largely to an increase in trade receivables as the onetime change in contracting party for e-commerce deliveries from China led to a timing difference in payments received. As such, net cash inflow from operating activities declined to $54.8 million compared to $99.3 million in 9 months last year. Since the close of the period ended December 31, 2019, about $51 million payment in respect of these trade receivables have been received. Free cash flow in 9 months was $44.4 million. Taking into account the $51 million received after the quarter, free cash flow will be higher.
We now move on to the financial indicators. Cash and cash equivalents were lower at $259.1 million compared to March 2019 due to the payment of dividends, timing of receivables in respect of international e-commerce deliveries as well as net repayment of a bank term loan. As a result, the cash position declined to $42.9 million as at December last year. EBITDA for 9 months was $162.7 million. EBITDA to finance expense stands at 15.8x compared to 25.2x last year due to adoption of SFRS 16 leases. Adjusted to exclude the impact of the leases, EBITDA to finance expense would be 22.3x for 9 months.
Let me now move on to dividend. The Board has declared an interim dividend of $0.05 per share, same as last year, bringing total year-to-date dividend of $0.015. The book closure date is on 20th February, and payment date is on 28th February. Our dividend policy remains unchanged based on a payout ratio ranging from 60% to 80% of underlying net profit for each financial year.
We now move on to the financial results. In the Post & Parcel segment, revenue remains largely stable in Q3. International revenue rose to a record of close to $150 million on the back of higher cross-border eCommerce-related deliveries, and this helped make up the decline in domestic revenues. Domestic eCommerce-related volumes registered strong double-digit percentage growth during the quarter but was insufficient to offset an accelerated decline to double-digit percentage in letter mail volumes, which continues to form the majority of revenue and volume.
For 9 months, Post & Parcel revenue rose 1.6% led by growth in international. Profit on operating activities declined 19.9% for Q3 and 16.7% for 9 months. Domestic earnings declined as growth from eCommerce-related deliveries was insufficient to offset an accelerated decline in letter mail volume as well as the partial cessation of advertising mail volumes. In addition, higher costs were incurred to improve service quality standards, such as hiring of additional postmen to provide for the additional workload associated with increasing eCommerce deliveries as well as enhancement of their remuneration.
In the Logistics segment, revenue was lower by 1.9% in Q3 and 2.2% for 9 months due to a decline in freight forwarding revenue as well as depreciation of the Australian dollar against the Singapore dollar. For Q3, there was an additional impact of the bushfires.
Quantium Solutions continued to deliver good operational momentum as revenue rose 25.6% in Q3 with the addition of new customers in Singapore and North Asia. Losses on operating activities stood at $0.7 million for Q3 compared to $0.5 million profit in Q3 last year. This was largely due to losses at CouriersPlease in December, which was impacted by bushfires in Australia. For 9 months, losses was $3.4 million compared to $1.2 million in 9 months last year.
For our Quantium Solutions, financial performance improved with improved operating leverage. This was offset by onboarding costs for eCommerce customers in Asia Pacific under SP eCommerce, lower freight forwarding profit due to lower volumes under Famous Holdings and, to a lesser extent, the Q3 negative impact from CouriersPlease.
Property segment revenue, which comprises commercial property rental and self-storage business, remains highly -- largely stable for Q3 and 9 months, with the SingPost Centre retail mall and office remaining at close to full occupancy. Profit on operating activities was stable for both Q3 and 9 months.
Let me now hand over to Richard for the outlook. Richard?
Thank you, Jason. In Singapore, domestic letter mail volumes have shown an accelerated decline, but eCommerce-related packet and parcel volumes continue to grow. The group has invested significantly to improve service quality, which has shown signs of -- which has done well over the peak season. The above are expected to result in lower blended margins and lower operating cash flows if this were to persist.
International mail continue to grow on the back of cross-border eCommerce delivery. However, the higher terminal dues have taken effect from 1st January 2020. We will continue to manage our traffic mix in order to mitigate the impact of the increases. The Property segment is expected to remain largely stable and a significant contributor to the group operating profit for the financial year.
The novel coronavirus issue has not had a material impact to the group results so far. However, if this situation persists or worsen, it might create further macroeconomic headwinds.
So with that, I believe we can start with the Q&A session.
[Operator Instructions] Your first question comes from the line of Rachael Tan of UBS.
I have a couple of questions in your domestic Post & Parcel business. So maybe could you explain what are the differences in yield between the domestic eCommerce and domestic letter mail on the postal network? And the second question would be, you talked about a double-digit increase in eCommerce parcels. Did the growth come from Speedpost? Or was it coming from the domestic letter -- domestic postal network?
This is Vincent, and happy new year to you. So the questions were about the domestic Post & Parcel business, about the yields between the mix and also the relative proportion of increases. So let me try to give some color. As you know, the vast majority of our volume is actually in letter mail. And the yield from the letter mail -- or the margins on letter mail will obviously be -- not just from a profitability standpoint but from a total aggregate standpoint, that will certainly be the largest contributor. I can't give you the exact split. That's not what we do. But I can give some color around the cost structure, as we've discussed previously, around delivering letter mails to letterboxes versus larger-sized items that will probably necessitate a doorstep delivery. So from there, you can sort of figure out the relative contribution of the various traffic mix that we have.
From a propulsion standpoint, that also sort of answers the question. While we have seen very strong eCommerce logistics growth in double-digit numbers, the base from which it's growing is a lot smaller than the total volume of letter mail that we have. So -- and letter mail has -- as we've announced, we've seen an accelerated decline in this quarter. We've seen that last quarter. We see that happening again this quarter. So that drop is very significant compared to what we can make up from an eCommerce growth standpoint. So hopefully, that gives you some color. If you like more detail, please let me know.
Rachael, your question relating to what we mentioned just now about the record revenue on the international mail side...
That was domestic.
Because the eCommerce-related stuff that has done very well came through the international mail side, not so much on the domestic. The domestic side had some. But as you know, a lot of the e-commerce stuff are coming through on a transshipment basis. So the inbounds are actually quite a small portion, and that was not -- way too low to even talk about trying to offset the decline in domestic mails.
Okay. And for the decline in domestic mails, which sectors do you see the most retrenchment from? Or was it primarily relating to admail which came off?
No. Actually, the largest proportion of drop was from the corporate customers. So we're talking about financial institutions, telcos, insurance, that sort of customer set.
[Operator Instructions] The next question comes from the line of Ngoh Yi Sin of CIMB.
Just on a question on -- we know that there's some service disruption arising from the coronavirus. I want to ask where SingPost is exposed -- where is the exposure for SingPost in terms of both the Postal and the Logistics segments so as to have a better gauge on what could be the potential impact.
Yi Sin, we didn't say that there was any disruption as a result of coronavirus. The statement we made was in respect to -- well, there has been no impact for this quarter. Of course, if the coronavirus outbreak continues and all gets worse, then we would expect that to be stronger macroeconomic headwinds, which will likely impact everyone. So that's what we meant.
Oh, I said -- not from this financial results but on the website. A few days ago, there were some announcements on postal services being disrupted in Hong Kong, Macau and China? Yes.
Oh, okay. Yes, so it hasn't affected us. Thanks for your concern. We are watching the situation very closely, and we, obviously, have our own BCP plans on the postal service. So we do not have any impact as of now. Clearly, the situation could be seen as deteriorating, and we are on top of it and watching how this will affect us.
Okay. But could you maybe remind us, like, where is the current exposure? Say, for example, in international mail, I think, China shipment is about 50%, I think.
Yes. So it's Paul here, Yi Sin. So maybe just -- I will take a stab at giving you a view in terms of potential impact. So this is a kind of broader commentary around where I think it will affect the whole of the logistics industry. And that is, obviously, we have come through the Chinese New Year and coronavirus has been obviously hitting us through the Chinese New Year period. Chinese New Year, pretty quiet in terms of manufacturing out of China. China is still, today, 70% to 80% of the world's global manufacturing.
So you've seen the news that, obviously, the holiday period was extended. Manufacturing facilities continue to be closed down. There are some speculation that, that may be extended further. And obviously, if that happens, then the end result is less manufacturing coming out of China, which affects the eCommerce business, international eCommerce business, and will affect the whole logistics industry. So it's something that we're watching, obviously, quite cautiously and carefully. And we'll have to adjust -- we will have to adjust as we see how that develops.
Okay then. Then how about for Logistics? And I noted that there was improvement in Quantium Solutions, right? Can you give us a bit more color? And given what's going on, is there going to be -- should we be expecting a negative impact in subsequent quarters?
For Quantium, we have talked about quite a bit in the last couple of years that we're kind of repositioning, and we took a kind of step about 2 years ago, and it took us about 1.5 years to come through that of off-loading and exiting from a number of loss-making customers. So having gone through that process, we turned our energies at the same time to generating new business for Quantium and focusing on our 3 core products consistently across the Quantium organization. I think we are seeing the results of that change in strategy coming through. And the revenue growth for Quantium was very healthy for the quarter, so we're delighted about that.
We're also seeing an improvement in terms of the operating leverage that we get from that revenue. So in other words, losses that we were experiencing before have started to slow down, and we've made an improvement in the financial performance of the business. We certainly expect that to continue for the foreseeable future. But obviously, I think we need to wait and see what happens with coronavirus because there could be some impact there. But putting those types of factors, which are uncontrollable to decide, the pieces that we are in control of are actually improving. So we're pleased about that.
Your next question comes from the line of Lim Ruiwen from DBS.
I have 2 questions. The first question, actually to continue on the line of impact of coronavirus issue. I think we are hearing from some China sources that, actually, the whole China network has kind of broken down as they are not able to find deliverymen. So I just wanted to ask if we are seeing any kind of slowdown in terms of international delivery that is coming to Singapore in that sense because if the network in China is kind of breaking down because they are not able to find enough deliverymen as well as helpers in the warehouse, then there should be an impact on international deliveries per se. Second question relates to could you share more color regarding the higher terminal dues that are coming in through January 2020 and the possible impact on the group?
Ruiwen, this is Vincent, happy new year. The 2 questions: you asked about international, our international business potentially being affected by the slowdown in China and what was happening over there; second one, terminal dues. So let me take the first one first. You know that the Chinese have extended the festivities -- or rather the Chinese New Year period and returned to work to -- over this weekend. So we are cautiously watching whether the return to the factories and supply chain starts firing up coming Monday.
There are signs that the situation is deteriorating in China. So obviously, we are concerned. Our problems aren't associated with the lack of Chinese deliverymen. I think our problems are more about will there be product and supply that originates from China, either through factories or through merchants or through warehouses, through the network that we have built. So we are watching this very cautiously. We are watching it very intently over the weekend to see if the supply comes back online. Well, that's it.
From a year-on-year point of view, this being the -- today is the 14th day of the Lunar New Year, right? Typically, by the 10th day, the supply keeps -- will start coming. So we are already 4 or 5 days into it in the sense that we -- year-on-year, from a comparison standpoint, year-on-year, we are already 4 or 5 days delayed. So you can sort of imagine what kind of impact that could potentially be to the -- as Paul mentioned, to the entire global supply chain, not just ours. So I guess your guess is as good as mine, but keep watching this and see what happens come Monday.
On your second question on terminal dues, it's not something that is new. We have this impact. As you know, every January, there's a reset. We have to deal with this. And it's not that we get to start of year, then we start to think about the measures to improve or to mitigate the impact of terminal dues. This is an ongoing process that we do day in, day out through the year. It's, like I say, every year, the impact is there. It's unfortunate that those dues will continue to go up based on the UPU arrangements. And we continue to strive towards making sure we can react to that.
Current report that we have suggests we have been able to do that in a pretty consistent manner. You can see that revenue continues to grow. Clearly, the margin contribution will continue to be under pressure given the higher cost, and this we treat as a volume-related cost that we can or cannot pass through to our customers, so we just have to react to that. But I guess from track record, we have consistently delivered higher revenues by being able to give that kind of benefit to our customers.
International volumes through Singapore from a transshipment basis, we'd like to think about it as not just being a cost issue, right? There's a bunch of other issues, factors that lead to supply chains flowing this way. Chief among those will be the connectivity of Singapore, what Singapore offers as a transshipment hub. Those factors continue to be in our favor, and we continue to work very closely with all the stakeholders involved in the ecosystem to generate this advantage for such a supply chain. So hopefully, that gives you some color around the 2 questions you asked.
And the next question comes from the line of Varun Ahuja from Credit Suisse.
I've got several questions, starting with the domestic business. On the domestic mail business, can you give a little bit of color on -- I'm sure the business has been seeing a lot of decline over the last few years. And based on your internal assessment, how much decline do you foresee if you go by industry wide? Because I'm sure some of the financial companies would have already done, in telcos, they've already done, so how much decline do you still see over the next 2 to 3 years, where can you see -- foresee some domestic mail decline? Anything on that front will be helpful.
Secondly, on the price increase that you had taken, the price adjustment that you had done, what sort of impact are you witnessing this quarter and in the next few quarters, either change in shift and in terms of eCommerce volumes? Anything -- a color will be helpful. Thirdly, on the domestic eCommerce, I know you said you don't give details, but if -- any color how much of the Post & Parcel domestic side of the business is still contributing by domestic eCommerce? And what I mean was including both the home-to-delivery and the mail side. So as a whole, is it fair enough to say that over the next 3, 4 years, the crossover will happen between the normal mail segment and domestic eCommerce? Anything -- any color on that will be helpful.
Fourthly, just want to understand when you were a consolidated entity, when you had the U.S. eCommerce business, you were using some of the IPs of the businesses. So what has happened after that demerger and bankruptcy? And if the other entity has taken over, how are you using that IP? That will be helpful to understand. And the fifth, general broad strategy, right, when you're now looking more focused on Southeast Asia, how are you looking over the next 2 to 3 years given some of the new logistic companies have come across in the eCommerce side? So how does -- how being a late entrant on that front in terms of making investments, how do you see and perceive gaining market share on that front in the Southeast Asia eCommerce?
Yes. Okay, Varun. Thank you. Vincent here. I'll take a stab at the domestic issues first, and then I'll hand over to my colleagues to talk about the U.S. and the broad industry questions you have. I think it's fair to say that the questions you raised about the domestic business, those weigh heavy on our mind. And rather than address those one by one, as you said, perhaps, I'll let you -- I'll give you a narrative of where we think is where our business is going and how we see this pan out over the last few months, few quarters and going forward.
So from a market share point of view for eCommerce, we believe we have made inroads. We have grown our market share based on estimates. And the traffic that has been attributed to us -- as you know, our advantage is in pretty much in letterbox delivery. So we continue to make significant inroads in growing that market share, and that has been very beneficial. But as we said previously, the growth, while strong, if we are just an eCommerce logistics company, I think we're really happy with the kind of growth that we've had in Q3 year-on-year given the double-digit performance, the majority of which has gone into letterbox, as I said. But the base of that growth is small. It's smaller by quite a bit of magnitude compared to the letter volume that we have. We are a traditional letter mail volume player.
So your question on how that has declined and when we expect a crossover is an extremely difficult one to answer. It all depends on the real decline. It all depends on what kind of substitution will continue to happen. So we have seen an acceleration in the substitution for some of our corporate customers, as we mentioned. We still have a large base of letter mail that comes from other stakeholders, government included. This is another big client of ours in terms of the letter mail volumes. So it's extremely difficult to answer this question, but we perhaps can take a leaf out of international peers and what they have been seeing. So -- and this is open information, if you would like to check on that. I'm sure you have. You'll be seeing high single-digit, low double-digit kind of declines from most of our industrialized peers, companies or countries that are probably equivalent to our stature in terms of where we are in our development of our technology penetration. And we would expect that our declines wouldn't be -- going forward, wouldn't be too far off those numbers that you see with our international peers.
So projecting when this will cross over is an extremely, extremely difficult thing to say. I would not want to provide that kind of guidance because it's just -- well, you can't -- because there's just too many assumptions involved in this. So hopefully, that gives some perspective. I know it's a difficult question to answer, and I know that you may want a little bit more detail, but that's just not something we are -- is possible for us to give right now.
Yes. On the question on -- I think you are referring to the EDGE that we used to talk about. So with the successful sale of the 2 businesses in the U.S., albeit it was through a Chapter 11 process, we have made transitional arrangement with the buyers to continue using the EDGE for our customers that are currently on it, but it will be with a view to transition out of it into another platform. So when we were making that decision whether to exit U.S. one, we have taken a very long hard look at the EDGE and what does it mean to our customers. And we came to the conclusion that it will lead to a short-term sort of inconvenience for some of our customers. But it's not an issue in terms of finding a substitute for the longer run.
So we -- for example, we have our own softwares that we have built in the past. We just need to think about whether to upgrade it to a certain level and how much that might involve in terms of dollars and cents, in terms of upgrading that. Or we could actually buy something off the shelf and, with a bit of customization, get it to a point that works for our customers as well. So that's currently what we are doing. There are not too many that are affected. And so as a result, it should not have a significant impact whatsoever to our numbers going forward.
With respect to the broader strategy, I think we have articulated in the past that with the exit of the U.S., we're going to refocus ourselves in Asia Pacific. That remains true. So with that in mind, we are looking at organic and inorganic sort of ideas as to how we're going to achieve the sort of scale that we would like to see ourselves having in the next 5 years in Asia Pacific. So we are looking all across Asia Pacific. And obviously, as you know, we have got a sizable business in Singapore. But we also have got businesses elsewhere in Asia Pacific, including, if you remember, we do have a fairly sizable business in Australia. So we are taking a very close look at this, at this point in time. And when we are ready, we'll make further announcement on this matter. Paul, do you want to...
Yes, so it's Paul here. And again, thanks for your questions. I mean what is -- I'll just add a couple of dimensions to this. I think in terms of Southeast Asia, just going back to the earlier question on Quantium, we are seeing a significant, organic-driven business in Thailand and Malaysia as well as Singapore and Indonesia. So I think in terms of Southeast Asia, we have certainly seen some improvement in our revenue growth and in our financial performance through Quantium. However, we also realize that we are not where we need to be in terms of size and scale. And therefore, as Rich just mentioned, we have to look at all options in terms of our strategy. And we might be in a position to talk about that, but more in a few months' time.
We should also not forget, and we are definitely not forgetting, that Australia is a key eCommerce market. We already have infrastructure in play there. Surely, it's an attractive market. It's got high penetration. I think it's the third or fourth highest in the world in terms of our eCommerce penetration. And it continues to grow, double-digit growth every year. We should also sort of come back to, I think, what we talked about in the last call as well, which was around we do believe there's an opportunity and we can see a convergence in supply chains of B2B2C. And that opens up some good opportunities for us to actually grow our eCommerce product by bolting on a B2B solution at the front end for the B2C product. And that's again something that we have been developing our plans on. And again, we'll talk about -- a bit more to that when we get to the right point.
So we're still very much focused on Southeast Asia. We have seen significant progress through our Quantium business, and we will continue to improve there. But that's not necessarily going to give us the size and scale what we believe we need, either in Southeast Asia or indeed in the Australian market. So it's more of a kind of watch this space.
Varun, maybe I can add a bit more narrative going back to the domestic issues. I think -- I would like to think that it is less something we are concerned about on things we can't control versus the things that we can absolutely control. So what we do know going forward is that there will be this convergence. There will be this tipping point. What we do know is that we have a fantastic network of delivery through our postal network, reaching every single postcode in Singapore. And a lot of it is relatively fixed as the cost is inelastic.
But what can we do to turn that into a true advantage for us? The steps we have been taking over the last few months, and quarters even, you've seen us release a new track package product that's designed to provide customer experience to the letterbox at a price point that is competitive and allows us to mitigate that kind of doorstep delivery required in a real urban setting. You will see that we will continue to refine our product set to leverage on such advantages.
So I think my point is the -- it's far more important for us to design a system that is agile to get to that point where you see the crossover, how do we deliver letter mail efficiently and productively now and use that same advantage to design a system that allows us to deliver eCommerce items just as productively and just as efficiently. So a lot of our efforts are focused on doing that. We've talked a bit about the future of cost program previously. Those efforts continue to be on track. We have gained traction. And I think that, that will be something the companies and stakeholders around should be watching. That is our way of building for the future.
And the next question comes from the line of Terry Ho from One Hill Capital.
I think I have just one main bucket of question today for Vincent, right, because I think, so far, there hasn't really been a lot shared about the new initiatives in terms of the product mix and the pricing that was introduced in -- or was announced in October. And I think it started in early December. So I just wanted to see, since that's already run for at least 2 months until now, is there a bit of color that you can share about how the consumers have been responding to these 2 new initiatives in terms of the new packaging as well as the pricing for airmail? Has this been -- has this affected volumes in any sense in terms of changing consumer preferences because now airmail is pricier, so people are posting less? Or is it still maintaining the same kind of volume?
And then the other question is more on, in terms of the transfer, because ultimately, terminals dues is a key concern. And the thing is that, I guess, the annual change of pricing was one of the steps that the team has taken to try to pass on the cost. So is it -- any color that you guys can share in terms of how often can we expect such price changes to happen moving forward?
Terry, can I just clarify, what do you mean by airmail? Did you say airmail?
Sorry?
Was it...
Oh, yes, airmail. Yes, he's referring to the international mail increase, the postage rate went up.
Right. That's the second question, right? On your first question, I didn't catch it. Did you say admail or airmail?
Airmail. Airmail, yes.
Admail?
Airmail.
Advertising mail.
Airmail. A-I-R.
The international mails.
Okay. I'll give some color anyway about the product that we have launched. And if this isn't -- it's off the mark, let me know, then I can clarify again and explain. So yes, we have announced the new product in October. It actually came in December, on the first day of December -- 2nd of December, actually. So from a Q3 point of view, it was just about a month of contribution, right? So you wouldn't see that. So now 2 months into it, we are seeing a little better uptick. The conversion has been to our satisfaction. More importantly is that the customer experience has actually been pretty good.
So in a sense, the -- let me give an explanation on how this product works. So if you go buy a retail product from a post office and say that you want to deliver this by some form of tracking, it's bigger than a document, so it is some kind of merchandise-eCommerce meeting, and you would like to send it via registered mail to the doorstep, we will convert that into track package product, and that actually goes to the letterbox. And it has accompanying features of security and tracking and photographs taken, notification is sent to the recipient. And so it's a highly secured product that actually doesn't need to have a doorstep delivery. And customers have been finding that very helpful where you -- so in fact, one of the reasons why we designed this is because customers have been saying, don't send it my door or my home. So rather have it sent in a very secured way to the letterbox. And the price point is also something that we've been very carefully designing this, too.
And the reason behind all that is, as I explained previously in the previous question, how do we transition as much of doorstep products into an infrastructure that we could be really effective in delivering to, meaning the letterboxes, and to leverage on that productivity, as you can imagine. So that effort continues. You will see that there will be a few more announcements coming out over the next few months on further product extensions beyond this one. And once again, it is the same motivation, it's the same intent, it's to move as much of the doorstep product to a letterbox. Well, we have said last quarter when we released this that the benefit that we expect would generally be a cost benefit more so than a revenue benefit, to start with. We do believe that once this experience and this product has traction, we believe that there'll be more conversions from a platform point of view. So we are working with our customers, the platforms and eCommerce customers, in moving product into a package that can be delivered in a secure manner to a letterbox rather than to a doorstep at a price point that is more competitive.
But you can imagine the challenges, right? Obviously, a lot of sellers don't actually know how big their items are. So it takes time to work through this process on saying, we can get this product out but we have to be clear that the product that comes from the sellers, the merchants on our platform, they can't fit the letterbox size. So this is a matter of maybe partly education, partly campaigning, partly sales. So we're working through with our partners to get this going. So hopefully, that gives you some idea of what we're talking about. So I don't -- I'm not sure it's an airmail thing. So if you're talking about international, then it's a different discussion. Coming in from overseas will take a longer time because we have to influence the merchants and sellers from overseas on something that is a letterbox size.
Now the next question in terms of the terminal dues and the costs. So as I've explained previously, the impact is an annual affair. We continue to see these changes come through. And I take it that you're asking for a bit more detail, a bit more color around what exactly are those mitigation measures that we are working towards. Supply chains are run in a way -- in this case, we're talking about West-bound product, right? So eCommerce items coming out from the East, generally in China, and how do we get them across to the importing countries, U.S., Europe, for example. So the transshipment model that we have, we continue to use it to our advantage through the postal network. But clearly, as the terminal dues kick in, in order to protect these revenues, we have to start thinking about different options beyond just the postal network. And we're looking at commercial model, commercial options. At the same time, we're looking at perhaps alternate transshipment locations. We'll be looking at a range of different options to try to strip out as much cost as we possibly can without having to pass this on.
The eCommerce market is extremely, extremely price sensitive, as you can imagine. So this terminal dues increase is really not a vote for postal system in shipping eCommerce products, right? But we'll just have to try to react to that and get our advantages as much as we can. And as I mentioned, the target that we have presents maybe a little bit of comfort to everyone that we continue to extend revenue quarter-on-quarter. This is -- Q3 this year is our biggest quarter ever yet. So you can see that we continue to make inroads there. So let me know if this is what you were asking. Certainly happy to share a bit more detail.
It's definitely answered my question. But I think a follow-on question that I have, if it's something that you can share, is in terms of how often will you -- will the team be reviewing prices, right? Because, for example, this time you guys hiked it about like $0.20, right, is it like on an annual review basis where you guys would think about whether you should pass the cost on or...
Terry, are you talking about the domestic postage or international postage?
The international postage.
International postage, yes. So we pass it on -- in a sense, we've managed to get the international postage rates review, and that was announced. And we continue to make these -- we have these discussions with our regulators. It's a regulated product, by the way. So this is not something that we can naturally just progress. So -- and as with any interactions with regulators, there's always -- we have provided evidence, provided data and worked through the details. So all I can say is if you look at our previous track record, it is always in intervals of a few years before any changes take place. I'm just quoting facts. But that doesn't stop us from speaking with the regulator and giving them the evidence and data. That said, I just want to be cautious because the outbound -- those rates only affect the outbound from Singapore to overseas. You can imagine that volume isn't a lot. And by far, our transshipment volume is many, many, many times -- many different orders of magnitude compared to what we generate outbound Singapore. So hopefully, that also gives you some explanation.
Is it possible for me to ask another question to Paul, right, more on the strategic level? As a follow-on to Varun's -- as a follow-on to your response to Varun earlier on, so is it right for us to then think that, moving forward, the focus will be more on Southeast Asia and Australia? And then would there be any more like expansion plans into other geographies?
Yes. So look, I think the -- we kind of want to make it clear that, for us, if we are going to invest anywhere, it's going to be in the Asia Pacific arena. And then let's be clear in terms of what that means. So for us, that's Singapore first. And it's then -- obviously, as we said, we are focused on Southeast Asia, and we're going to continue to grow our business in Southeast Asia. We started this with walking away from North Asia. Hong Kong is still a very important transshipment point for us. So Hong Kong will remain in play. Japan also remains in play. It's a good market for us. And we have operations in places like Taiwan, India and the Philippines.
But the other key one for us is really Australia. And we talked earlier about the reasons why Australia is quite critical for us. We do have business in places like the Netherlands and places like the U.K., and those businesses will continue to operate and -- so freight forwarding businesses under Famous. And we also have good potential opportunities as well as current business, which is coming out of Europe into Asia. And we see more of that opportunity coming through from large eCommerce platform players in Europe looking for an Asia delivery infrastructure. So we've got a part to play there as well. So geographically, definitely, the key focus is Asia Pac. Singapore is at the forefront of our investment strategy, but we will be looking to invest in other markets as well within the Asia Pac region.
And as I said earlier as well, let's not forget that we do see the opportunity for a B2B2C play which, again, we can see can be bolted on to our already comprehensive B2C network. And we think that will also provide some of the benefit and value for us.
There are no further questions at this time. [Operator Instructions] We don't have any more questions on the line. Sir, please continue.
Okay. That's it. Thanks, everybody, for dialing in. Once again, happy new year. Stay healthy.
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