Yahoo Finance 4 Singapore Stocks That Announced Strategic Reviews: How Have Their Share Prices Fared?
It always piques my curiosity when a company declares that it will undertake a strategic review.
Strategic reviews can be seen as a thorough review of a business’s operating divisions to see how it can maximise growth while shedding unprofitable segments.
Management usually announces such reviews when growth has hit a roadblock or if there has been a significant change in the industry in which the company operates.
Other reasons could include a bloated organisational structure where costs have ballooned or assets that need to be disposed of as they are not yielding good returns.
Strategic reviews may not always yield the positive outcome that investors seek.
The downside is that most also require several years before results can be noticed.
However, if done properly and diligently, strategic reviews could act as a reset for the business and put it on the path to better growth while shedding a layer of unnecessary expenses.
We look at four companies that have announced such reviews to see how they have fared.
Singapore Post (SGX: S08)
Singapore Post, or SingPost, is a postal and e-commerce logistics provider.
The group serves customers in more than 220 locations and employs more than 4,900 staff in 13 offices worldwide.
The postal company’s board of directors initiated a strategic review of its portfolio of businesses when its fiscal 2023 (FY2023) earnings were released on 11 May.
Investors need to be patient for the strategic review to be completed by the end of this year and it aims to identify growth opportunities and to identify possible divestments and capital recycling initiatives.
SingPost’s Post & Parcel segment posted a full-year loss of S$15.9 million for FY2023, reversing the profit of S$24.9 million a year ago.
It has been just three months since the announcement of the strategic review and SingPost’s share price has remained flat during this period.
The group has seen its total dividend plunge to just S$0.0058 in FY2023 from S$0.018 in FY2022.
However, for its fiscal 2024’s first quarter (1Q FY2024) business review, SingPost posted an 11.8% year on year increase in operating profit to S$11.9 million on the back of a 15% year on year decline in revenue.
Singtel (SGX: Z74)
Singtel is Singapore’s largest telecommunication company and offers mobile, broadband, and cable TV services.
The blue-chip group announced its strategic review more than two years ago in late May 2021.
The review revolved around three key pillars – tapping on its 5G leadership to boost its consumer and enterprise businesses, developing new growth engines for its ICT business, and unlocking the value of its infrastructure assets.
Since this announcement, Singtel’s shares have dipped by 4.9% from S$2.45 to S$2.33.
The group has sold off its Australian tower assets for A$1.9 billion in late 2021 and considered a listing of its Australian unit Optus.
For FY2023, Singtel reported better financial performance and raised its final dividend to S$0.053 from S$0.048 a year ago.
Its recent 1Q FY2024 business update also looked promising as the telco reported a 14.5% year on year rise in underlying net profit.
StarHub Ltd (SGX: CC3)
StarHub, like Singtel, also initiated a strategic review and transformation back in 2021 when it held its Investor Day.
Back then, the telco announced that its October 2018 DARE 1.0 transformation program was a success as it delivered cost savings of S$270 million, exceeding its target of S$210 million.
At the same time, StarHub also boldly released information on DARE+, the next phase of its transformation that will last from 2022 to 2026.
The group provided an update on DARE+ during last year’s Investor Day which saw it falling short of its savings target along with upward revisions to investment target.
Product enhancements were also planned for its three core divisions.
These measures look to be bearing fruit as StarHub announced higher revenue and net profit for its latest fiscal 2023 first-half results.
The telco’s share price, though, has fallen by close to 21% since it announced its DARE+ transformation plan.
SIA Engineering Company Ltd (SGX: S59)
SIA Engineering, or SIAEC, provides maintenance, repair and overhaul (MRO) services to a client base of international airlines and aerospace companies.
SIAEC’s strategic review cum transformation has arguably lasted the longest among the stocks featured here.
Phase One of the group’s transformation began in 2017 with more than 100 initiatives implemented to boost operating performance and reduce operating costs.
Phase Two was launched in January 2021 and involves planned investments over three years in digitalisation and automation while adopting the LEAN methodology.
These moves could be bearing fruit as SIAEC’s share price has risen 13.4% since its announced Phase Two.
That said, part of the reason for the share price rise may also be attributed to a brighter outlook for the aviation industry as the pandemic recedes.
SIAEC’s recent 1Q FY2024 performance was encouraging.
The group saw a 52.7% year on year surge in revenue to S$261.9 million while net profit more than doubled year on year to S$110.9 million.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
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