Singapore Post Limited: An Analysis of 97.3% Net Profit Growth

Business Description

Singapore Post Limited (SingPost) is a leading provider of postal and parcel delivery services, eCommerce logistics, and property services. The company operates through three key business segments: Australia, International, and Singapore. SingPost’s geographic footprint includes significant operations in Singapore, Australia, New Zealand, and various international markets.

Industry Position and Competitors

SingPost holds a strong position within the logistics and postal industry, competing with companies such as DHL, FedEx, and Australia Post. The company’s market share is bolstered by its comprehensive service offerings and strategic geographic presence.

Revenue Streams and Customer Base

SingPost derives its revenue from mail and parcel delivery, logistics solutions, and property leasing. The customer base spans individual consumers, businesses, and eCommerce platforms. The company’s competitive advantage lies in its integrated supply chain solutions and extensive postal network.

Financial Statement Analysis

Income Statement

For the half year ended 30 September 2024, SingPost reported a revenue increase of 20.0% year-on-year to S\$992.4 million, up from S\$827.3 million. This growth was driven by strong performance in the Australia and Singapore segments. The net profit attributable to equity holders of the company surged by 97.3% to S\$22.6 million from S\$11.5 million, indicating significant profitability improvement.

Balance Sheet

As of 30 September 2024, total assets amounted to S\$3.2 billion, with current assets at S\$714.3 million. The company’s net assets stood at S\$1.42 billion. Notably, current liabilities decreased to S\$575.0 million, indicating improved liquidity and financial stability.

Cash Flow Statement

Operating cash flow before working capital changes was S\$105.6 million, up from S\$71.8 million in the previous year. Net cash used in investing activities was S\$87.3 million, primarily due to acquisitions and capital expenditures. Net cash used in financing activities was S\$5.2 million, reflecting repayments and dividend distributions.

Key Findings

Strengths

• Revenue Growth: A substantial 20.0% increase in revenue, driven by strong performance in key segments.
• Profitability: Net profit attributable to equity holders increased by 97.3%, reflecting significant improvement in profitability.
• Cash Flow: Strong operating cash flow indicates healthy business operations.
• Asset Base: Stable asset base with significant investments in property and equipment.

Risks

• International Segment: The International cross-border business faces a challenging environment with a 26.8% decline in revenue.
• Operating Expenses: Total operating expenses increased by 18.3%, largely due to acquisitions and higher freight costs.
• Competitive Market: Increased competition in the eCommerce logistics market, leading to margin pressures.

Dividend Announcement

The Board of Directors has declared an interim dividend of 0.34 cents per ordinary share, payable on 2 December 2024. This follows a final dividend of 0.56 cents per share paid for the previous financial year.

Special Activities

SingPost is engaged in strategic initiatives to drive efficiency and revenue synergies, particularly in Australia. The company is also finalising an operating model with authorities to ensure the long-term viability of postal services in Singapore.

Recommendations

For Current Investors

Hold: Given the strong revenue and profit growth, along with strategic initiatives underway, current investors should consider holding their shares to benefit from potential future gains.

For Potential Investors

Buy: With significant improvements in profitability and ongoing strategic initiatives, potential investors may consider buying shares to capitalize on the company’s growth trajectory.

Disclaimer

This analysis is based on the unaudited condensed interim financial statements for the half year ended 30 September 2024. Investments in securities carry risks, including the risk of losing capital. Please conduct thorough research or consult a financial advisor before making any investment decisions.

Report Date: 6 November 2024