Yahoo Finance Singapore Post Has Unveiled its Strategic Review: 5 Aspects Investors Should Know About
Singapore Post (SGX: S08), or SingPost, has unveiled its long-awaited strategic review.
The postal service provider saw its share price plumb a new all-time low last month as investors fretted over its prospects.
It has been nearly a year since the group initiated its strategic review and the completion marks a new chapter for the business.
Management has outlined five broad strategies to be executed over the next three years to enable it to transform into a pure-play logistics provider.
Source: Singapore Post’s Press Release
These strategic thrusts will not only help to drive growth but also help the group to unlock value.
Let us dive deeper into each aspect.
1. Reorganisation of the SingPost Group
First off, SingPost will reorganise its corporate structure to better reflect its growth ambition and create flexibility for the organisation.
The current structure is split into four functional business units – Logistics, Post & Parcel, Property, and Others.
The new corporate structure will split the group into three geographic regions Singapore, Australia, and International.
For Singapore, SingPost will still have its postal network which it intends to integrate with its eCommerce logistics network to form a single, efficient combined network.
In Australia, the group is one of the top five national integrated networks with a market-leading fourth-party logistics (4PL) platform.
Its International business is predicated on serving cross-border clients through an asset-light model.
2. Capital investments to drive growth and unlock value
Based on a sum-of-the-parts breakdown, management believes that SingPost’s current share price does not reflect the intrinsic value of the group.
Hence, active capital management will be undertaken to optimise its balance sheet and improve its credit rating.
The business will undergo capital recycling to monetise non-core assets and businesses with proceeds to be allocated for debt repayment, growth investments, and shareholder returns.
From fiscal 2025 (ending 31 March 2025), the board of directors will adopt a dividend policy of paying out between 30% to 50% of SingPost’s underlying net profit.
3. Becoming a logistics market leader in Singapore
Next, the group will work on building its capabilities and network to capture the growth of eCommerce logistics in Singapore.
The eCommerce market has strong growth potential according to Statista and is forecasted to grow by 10.4% annually from 2024 to 2029 to reach S$10.8 billion.
SingPost will also work on reviewing and optimising its postal services and infrastructure along the way.
The idea is for the group to re-engineer its network using asset-light alternatives while maintaining high service standards.
It will also work closely with regulators to review its postal services sub-division to pursue a sustainable long-term commercial framework.
4. Scaling up its capabilities and presence in Australia
SingPost has plans to achieve scale for its Australian division.
The group is among the top five logistics providers in the country and according to IBISWorld, the integrated logistics market is forecast to reach US$129 billion by 2028.
SingPost will work on integrating the acquisition of Border Express and the merger of CouriersPlease to achieve better synergies.
It also intends to explore partnerships and investments to continue to scale and grow its logistics business.
There will be a need to seek other funding options to help maximise value for shareholders.
5. Building its technology footprint
SingPost enjoys international connectivity to around 200 markets via its international postal network.
It also possesses a digital 4PL platform to manage end-to-end supply chains.
According to Vantage Market Research, the global cross-border eCommerce logistics market is forecast to hit US$3 trillion by 2028, growing at a rapid pace of 25.1% per annum from 2022 to 2028.
SingPost will explore opportunities in China, Hong Kong, Europe and the UK for the first mile, hubs and gateways, and air network optimisation.
For the markets in Southeast Asia and the Middle East, it will target customs clearance.
The aim is to enjoy steady organic growth to eventually establish itself as a leading international eCommerce supply chain and logistics operator.
Get Smart: A 3-year roadmap
SingPost has laid down a clear roadmap for its transformation over the next three years.
It aims to become an international, technology-driven logistics and eCommerce enterprise with at least 85% of revenue generated from overseas operations.
Investors can look forward to more initiatives and corporate announcements to accompany each of its strategic thrusts.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
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