will likely be pleased to see a 35% rise in the share price over the past quarter. However, this recent improvement doesn't erase the disappointing returns over the last five years. During that period, the share price has fallen by 37%, significantly underperforming the broader market.
While the past week's performance may offer some reassurance, long-term investors remain in the red. I mean very super RED, the stock had dropped for 10+ years…. Is falling for multiple Years from it all time high! Let's examine whether the company's underlying business fundamentals have contributed to this decline.
Company Overview
Business Segments
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Logistics (67.7% of revenue)
Cross-border e-commerce logistics.Freight management and forwarding.Warehousing and distribution solutions.
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Post and Parcel (29% of revenue)
Traditional mail services (letters and parcels).Courier and delivery services for local and international markets.
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Property Leasing (3.3% of revenue)
Includes properties such as the SingPost Centre, a retail and office complex.
Earning Overview
In the first half of the fiscal year ending September 30, 2024, Singapore Post Limited (SingPost) reported significant financial improvements. Revenue: Increased by 20% year-on-year to S$992.4 million, up from S$827.3 million. Net Profit: Surged by 65.5% to S$22.2 million, compared to S$13.4 million in the same period the previous year. Operating Profit: Rose by 62.9% to S$51.2 million from S$31.4 million.
Segment Performance:
Australia: Revenue increased by 44.1% to S$574.9 million, largely due to the consolidation of Border Express following its acquisition in March 2024. Operating profit rose by 30.2% to S$30.4 million.
International Cross-border Business: Revenue declined by 26.8% to S$117.9 million, though operating profit improved to S$4.3 million from S$3.0 million, indicating enhanced operational efficiency.
Freight Forwarding: Revenue grew by 9.7% to S$148.7 million; however, operating profit decreased by 29.2% to S$8.4 million due to increased sea freight costs.
Singapore Postal and Logistics: Revenue rose by 12.4% to S$129.6 million, driven by higher delivery service revenues following a postage rate increase in October 2023. Despite this, the segment reported an operating loss of S$0.9 million, an improvement from a loss of S$14.7 million in the prior year.
Property Leasing: Revenue increased by 13.2% to S$43.0 million, with operating profit up 11.7% to S$23.9 million, attributed to higher rental income from SingPost Centre, which had an occupancy rate of 98.2% as of September 30, 2024.
Fundamental Analysis
Markets are often efficient, but it's clear that share prices don't always align perfectly with a company's underlying business performance. A useful way to assess changes in market sentiment over time is to analyze the relationship between a company's share price and its earnings per share (EPS).
Over the past five years, while Singapore Post's share price declined, its EPS fell by an average of 13% per year. This decline in EPS exceeds the compound annual share price drop of 9%. This suggests that the market may have anticipated a downturn in the company's performance or is optimistic about potential future improvements.
Despite strong revenue contributions, SingPost has a thin profit margin, with net income reported as $11.4 million (a net margin of 1.4%). This means for every $100 in revenue, only $1.40 remains after expenses, which indicates a high-cost structure. profit and net margins have declined significantly over the years. For example, in 2014, the net margin was 23.38%, but by the most recent period, it had dropped to 1.32%.
Guidance
SingPost is transitioning from a traditional postal company to a logistics and e-commerce player.
First Half FY2024/25 Results: For the half-year ended September 30, 2024, SingPost reported a 20% year-on-year increase in revenue to S$992.4 million. Net profit rose by 65.5% to S$22.2 million, and operating profit increased by 62.9% to S$51.2 million.
Full Year FY2023/24 Results: The company achieved a net profit of S$81.5 million, a significant increase from S$38.8 million in the previous year, indicating improved operating fundamentals across its core businesses.
Free Cash Flow
As of September 30, 2024, Singapore Post Limited (SingPost) reported a free cash flow per share of S$0.01 for the six months ending September 2024, and S$0.03 for the trailing twelve months (TTM) ending September 2024. Over the past three years, SingPost's average free cash flow per share growth rate was -41.70% per year, indicating a decline in free cash flow generation.
In the financial year ending March 2024, SingPost's free cash flow per share was S$0.02, calculated as the sum of operating cash flow and capital expenditures divided by the diluted average shares outstanding. As of September 30, 2024, SingPost had cash and equivalents of S$428 million, with projected cash flow from operations between S$45 million and S$55 million over the 12 months to September 2025.
These figures suggest that SingPost has experienced fluctuations in its free cash flow over recent years, with a notable decline in the past three years.
Technical Analysis
Support and Resistance Levels: Support: The stock finds support just below the current level from accumulated volume at $0.360 and $0.330. Resistance: Resistance is encountered at $0.600, based on accumulated volume.
Volume Analysis: A decrease in trading volume without corresponding price changes may indicate a potential turning point, warranting caution.
Risks and Challenges
Declining Margins: SingPost’s net margin has dropped significantly from 23.38% in 2014 to around 1.32%, highlighting challenges in controlling costs and maintaining profitability.
Rising Costs: High operating expenses, particularly in logistics, are squeezing profits despite revenue growth.
Earnings Volatility: Profits have shown erratic patterns, with periods of modest gains followed by sharp declines.
E-commerce Opportunities: The logistics segment is well-positioned to benefit from global e-commerce growth, but sustaining profitability remains a challenge.
Competitive Market: Intense competition in the logistics and courier sectors adds pressure on margins.
Efficiency Improvements Needed: Addressing cost structures and operational efficiencies will be critical for long-term success.
Valuation
December 20, 2024, SingPost's stock was trading at a 193% premium to its fair value estimate of SGD 0.56, suggesting potential overvaluation. SingPost's valuation in December 2024 reflects a complex interplay of market dynamics, company performance, and recent controversies. Investors should consider these factors, along with broader market conditions, when evaluating the company's stock.
Market sentiment
Current situation is “Super Bear” too much uncertainty!
In December 2024, SingPost faced a significant scandal involving the mishandling of a whistleblower report, leading to the dismissal of several top executives. This incident has impacted investor sentiment and may influence the company's valuation.
Reputational Damage: This scandal has tarnished SingPost's longstanding reputation, leading to an 11% drop in share prices.
Regulatory Scrutiny: The situation has drawn attention to SingPost's internal controls and corporate governance, prompting calls for improved oversight.
Conclusion
SingPost's revenue shows promise but with the scandal in Dec 2024 the company have lot more hidden problem, its declining profits and narrow margins raise concerns about the sustainability of its growth and its ability to deliver value to shareholders. Short Term Singpost is a value trap, long term the company need Singapore Government “Help” to rebuilt the company, I won’t buy the stock because there is better stock out there to invest.
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