Singapore Post - OCBC Investment 2024-03-20: Hit The Road; Reset For Growth

• SingPost (SGX:S08) has completed the strategic review of its business and identified five strategic thrusts to be executed over the next 3 years.

Pivoting into a pure-play, asset-light international logistics enterprise

(i) SingPost will be reorganised into the three business units of Singapore, Australia, and International, with each segment representing a logistics enterprise in its own market.

• - Read this at SGinvestors.io -
• Secondly, it aims to provide more transparency and useful information to investors and other financial statement users, thereby helping to close the gap between the market and intrinsic values of the company.
• - Read this at SGinvestors.io -

Strategic capital management

(ii) SingPost continues to explore strategic partnerships to accelerate the growth of its businesses.

• At the same time, it has identified a list of non-core assets and businesses, including selected properties, that it will seek to monetise – though a timeline and quantum were not disclosed given their dependence on market conditions, operational and regulatory considerations, and potentially shareholders’ approval.
• Proceeds from capital recycling activities will be deployed to pare down debt (in particular, to deleverage acquisition debt for its Australia business), support growth investments (e.g. merger & acquisition (M&A) opportunities, sustainability CAPEX, merger of the e-commerce and postal networks in Singapore), and return capital to shareholders.
• Altogether, management is targeting for aggregate return on equity (ROE) to reach the teens level, aligning with those of global benchmarks, while margins should be in line with other pure-play logistics companies.
• From FY25, SingPost will adjust its dividend policy to pay out 30-50% of its underlying profit from 60-80% previously. Management believes that this will allow it to strike a balance between delivering sustainable returns to shareholders and meeting the capital needs of the company.

Growth opportunities identified for each business unit

(iii) Within the Singapore market, SingPost remains committed to quality and timely domestic deliveries.

• Read more at SGinvestors.io.

Ada Lim OCBC Investment Research | https://www.iocbc.com/ 2024-03-20 SGinvestors.io

---