Singpost FY 2016/2017

Q3 FY16/17 Summary

Revenue rose 16.8 per cent to S$369.4 million for the third quarter of FY2016/2017. Underlying net profit was down 28.5 per cent due to operating losses in the US eCommerce business, Regional eCommerce Logistics Hub costs, and a decline in domestic mail volumes. Q3 FY2016/2017 dividend of 0.5 cent per share declared compared to 0.15 cent per share for last year. Operating Profit decreases from Q3 FY15/16 54.6M to Q3 FY16/17 37.3M. 

Revenue movement is pointing towards a stronger business than previous year. I like this part of the story where it is seen as a holistic e-commerce and logistics company with the support of Alibaba Group. This is a move by Alibaba to pit itself against Amazon. In fact those in ecommerce will understand Aliexpress/Alibaba complements Amazon instead of been seen as a competitor.

I dislike this portion of the acquisition. The question here is "Did Singpost overpay for the new headcount?"

I am concerned on the lower mail volumes. As we are moving into the digital age and alot companies are going green by using e-statements/ soft copy, the demand for letter mail will naturally decrease. 

Looking at Cashflow Statement, FY 2016/17 is a better year than FY 2015/2016 as all the CAPEX has been spent already. The total Free Cashflow is improving for this FY 2016/2017. However, I saw a big ticket item on increase in bank loan, increases from 253,113 to 522,031. Nonetheless,  Interest coverage ratio remained healthy at 24.7 times, compared to 42.1 times last year,  its cash position is relatively good but at the expense of cutting dividend. I still think Singpost's dividend policy should not be changed. They should reduce their staff cost, pay them with dividend. You can use your dividend model to derive the intrinsic share price of Singpost. This is on my watchlist for now.

13/2/2017

Mr Market whacked the share price of Singpost and share price tumbled more than 7 percent in the morning. TradeGlobal, the US ecommerce firm Singpost acquired in 2015 is expected to incur losses for full year. TradeGlobal accounted S$169 million in goodwill and S$43 million in customer relationships in the intangible asset. I am waiting patiently for the big cut in price.

14/3/2017
Today the share price hit lowest at 1,32, Let's see whether it will reach close to 1.25.