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3 Reasons Why You Should Invest In SingPost
Tradeable, Tradeable Ideas | 26 May 2014
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By: Lim Si Jie
Articles (169) Profile
  1. Extraordinary full year results for SingPost despite facing tough conditions in the postal services industry.
  2. Redeeming of bonds is a positive indication of SingPost’s finances.
  3. SingPost has a consistent dividend policy for the past ten consecutive years

Singapore Post Extraordinary Results
Singapore Post achieved a 24.6 percent growth in its revenue in its latest financial year on the back of acquisitions and the soaring popularity of e-commerce. Despite the tough and challenging conditions in the industry, SingPost still managed to produce very note-worthy results.

Mail volume fell for a second consecutive year, as SingPost faced similar trends to the rest of the global postal industry. Volume fell by 1.3 percent compared to the 2012/13 year.

However, despite the fall in mail volume, mail revenue rose by 11.5 percent on a year-to-year comparison due to e-commerce growth and acquisitions like direct mail firm Samplestore. Samplestore (EK Media) was acquired by SPH for US$1.2 million back in September 2013.

As the e-commerce market expands in Asia, SingPost is set to capture the increase in e-commerce volume in their favour. Although there are many different postal service providers for items bought online, SingPost still remains the most commonly-used postal service provider in Singapore.

SingPost has been transforming itself to reduce reliance on the traditional postal business and the domestic market. SingPost is aiming to build on future growth in e-commerce and regional shipping. The growth in regional e-commerce business has helped to mitigate the decline in traditional postal business as seen in the increase in revenue in 13/14.

SingPost FY 13/14 Results Presentation

Saying Goodbye To Debt

As part of SingPost growth strategy, they issued $300 million worth of bonds with a coupon of 4.25 percent. The net proceeds from the issue of the securities (after the deduction of issue expenses) were used to finance new investments as part of SingPost’s growth strategy. Since then, SingPost has made quite a number of acquisitions to push forward their growth strategy.

SingPost has recently redeemed the $300 million worth of bonds from investors. Even after making a number of acquisitions since issuing the bonds,  SingPost is still able to find the money somewhere within the group to redeem the bonds. The move by SingPost to redeem the bonds is a very positive indication of their finances and a confident boost for investors.

Consistent Dividend Policy

A Track Record Of SingPost’ Dividend Payout

Despite having to fund its growth strategy, SingPost continues to pay out dividends to its shareholders. As of the current date, SingPost has been consistently paying out dividends in every financial year since its IPO. It is certainly not easy to continue paying out dividends for five consecutive years, let alone ten.

#Bullish But With Slight Concern
Given that SingPost has recently risen to a 52 week high of $1.54, I am slightly concerned that whether now is a good time to enter into SingPost as a shareholder. For investors who value protection of their capital, you would rather sit and wait for the consolidation to happen before plotting your move to enter the market.

There is possibly a chance that SingPost would go higher and ride on the current uptrend. However, personally, I would rather stick by the sidelines and wait for the pullback.

UPDATE: SingPost has just rose above its 52 week high on the back of SingPost’s announcement that Alibaba Group will be buying a 10 percent stake in SingPost. What does this entail for SingPost and its share price? Read it here.

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Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Singapore Post  0.940 -0.005 -0.53%   
Business: [FY19 Turnover] Post and Parcel (47.8%), logistics (31%), eCommerce (15.5%), property (5.7%).

Insight: May-19, FY19 revenue rose 2.9% to $1.6b largely du... Read More

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