5 Reasons to Consider Investing in Singapore Post

May 9, 2024

In a rapidly digitalizing world, traditional postal services are at a crossroads: adapt or become obsolete. Singapore Post Ltd (SGX: S08), commonly known as SingPost, is leading the charge, transforming from a conventional mail carrier into a dynamic logistics and e-commerce leader. This shift is not just a change in operations; it is a complete reinvention of a national icon. As SingPost forges a new identity in the digital era, it offers an enticing investment opportunity, particularly as e-commerce continues to reshape global retail and business landscapes. Here are five key reasons to invest in SingPost.

1. Strong Transition to Logistics and E-commerce

Singapore Post has strategically shifted from traditional postal services to logistics and e-commerce, a move spurred by declining mail volumes and the booming digital commerce sector. With a 40% drop in mail volumes from 2018 to 2023, the pivot towards logistics has fueled a significant revenue surge, accounting for 85% of the company’s revenue. This transformation positions SingPost well in a rapidly growing market, especially given the projected growth of Singapore’s e-commerce sector from US$5.9 billion in 2021 to US$10 billion by 2026.

2. Robust Infrastructure and Geographic Reach

SingPost boasts an extensive delivery and logistics network, leveraging its established infrastructure which includes a vast fleet of delivery vans and a comprehensive distribution capacity. This network not only covers every household in Singapore daily but is also optimized for e-commerce deliveries. The company’s global reach, enhanced by its status as a member of the Universal Postal Union, provides a competitive edge in the international logistics market.

3. Financial Health and Value Unlocking Initiatives

SingPost has shown resilience and adaptability in maintaining profitability despite market challenges. The company has S$2.5 billion in assets ready for value unlocking over the next three years, indicating strong financial health and strategic foresight. Efforts include capital recycling plans and exploring strategic partnerships, particularly in enhancing its Australian logistics operations, which have been identified as a major growth avenue.

4. Commitment to Innovation and Service Excellence

The company’s focus on innovation is evident from its introduction of advanced sortation machines and the launch of its 4PL tech platform, ARRIV, which supports its cross-border e-commerce logistics. Additionally, SingPost is recognized for its high service quality standards, being one of the top global postal agencies in on-time delivery, which enhances its brand reputation and customer trust.

5. Attractive Investment Metrics and Growth Prospects

SingPost offers an attractive upside potential of 28.9% with our target price of S$0.58. The company’s strategic initiatives are projected to drive strong earnings per share growth in the coming years, coupled with a robust dividend yield that enhances its attractiveness to investors looking for both growth and income.

Conclusion: Capitalise on the transformation into a global logistic company

Investing in Singapore Post represents an opportunity to capitalise on a company that is successfully navigating a sector in transformation. With its strategic shift towards logistics and e-commerce, robust infrastructure, strong financial strategies for growth, commitment to innovation, and solid investment metrics, SingPost is well-positioned to deliver value to its shareholders in a dynamic global market. For investors, this represents a unique opportunity to participate in a historically rich company that is actively shaping its future landscape. Despite of such optimism, downside risks include a steeper drop in letter volumes, foreign exchange (forex) impact from a weaker AUD and RMB against the SGD.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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