Singapore Post: Potential for Significant Special Dividends
Maybank Research | January 2, 2025
SingPost is poised for significant special dividends following the termination of three key executives, asset monetization efforts, and the appointment of a new COO. The company aims to become asset-light and is actively monetizing non-core assets. The ongoing sale of the Australia business and the anticipated conclusion of the Famous Holdings sale by the end of January 2025 are expected to generate SGD80-100 million in proceeds. Maybank Research maintains a BUY rating on SingPost.
Potential Special Dividends and Asset Monetization
With the reduction of Australian debt and the potential Famous Holdings sale, approximately SGD400-450 million in excess sales proceeds could be distributed as special dividends. SingPost currently holds SGD428 million in cash, suggesting limited need to retain proceeds from asset sales. This translates to potential special dividends of SGD0.17-0.20 per share [[1]]. The board has confirmed its commitment to monetizing non-core assets, including Famous Holdings, SingPost Centre, and post offices [[1, 2]].
Focus on Fundamentals
Despite recent events, the roadmap for returning shareholder value remains unchanged. Shareholders could potentially receive up to SGD0.86 per share if all targeted assets are monetized. Maybank Research believes downside risk is limited and maintains a strong BUY rating, urging investors to focus on the fundamentals [[2]]. The current share price is SGD0.54 with a 12-month price target of SGD0.77, representing a potential 43% upside [[2]].
Company Overview and Value Proposition
SingPost, a leading postal and e-commerce logistics provider in Asia Pacific, is the fourth-largest logistics player in Australia. Its net assets are estimated at SGD0.90 per share, suggesting significant undervaluation. Profitability and dividends are projected to surge in the coming years, driven by asset monetization and increasing e-commerce volume [[2]].
Price Drivers and Financial Metrics
Historical share price trends have been influenced by various factors, including the COVID-19 lockdown, disappointing financial results, Alibaba’s share sale, bids for the Australian business, and higher financing costs [[2]]. Maybank Research anticipates rising dividends and profits in the next few years, along with a reduction in debt and interest expense, particularly with continued asset sales. Operating cash flow is expected to remain strong [[2]].
Swing Factors
Upside potential lies in asset monetization, improved financial performance (especially in FY25E), increased dividends, and a turnaround in the core Singapore postal business [[2]]. Downside risks include lower consumer spending impacting logistics and postal volume, high annual interest expense (approximately SGD49 million), and lower-than-expected valuations from asset sales [[2]].
ESG Analysis
SingPost faces ESG-related risks, including stranded assets, higher financing costs for non-sustainable projects, and stringent regulatory requirements. Mitigation efforts involve enhancing sustainability practices, investing in green technologies, and strengthening internal controls, including adopting frameworks like the Singapore Green Bond and ESG Registry [[3]]. SingPost’s ESG score is 16.4, ranking 47th out of 407 companies in the transportation industry group, indicating effective ESG risk management [[3]]. Further improvements could include increased investment in green technologies (such as expanding the electric vehicle fleet) and greater community engagement [[3]].
Material ESG Issues
Environmental (E): SingPost aims for net-zero carbon emissions by 2030 in Singapore and 2050 globally. Initiatives include electrifying its Singapore delivery fleet, installing solar panels, and implementing efficient cooling systems. These efforts have reduced electricity use and scope 1 emissions [[3, 4]]. Logistics operations generated significant carbon emissions in 2023, and SingPost has introduced sustainable packaging options and electric vehicle deliveries to address this [[4]].
Governance (G): A past incident involving fraudulent salary claims and bribery attempts led to strengthened internal controls and due diligence, with an emphasis on employee credential verification and increased audits [[4]].
Social (S): SingPost supports worker health, promotes gender diversity (achieving 49.1% female workforce representation in 2023), and engages in community initiatives. Addressing the diversity imbalance in senior management (36% female representation in FY23/24) is ongoing through a Diversity and Inclusivity policy and the Employers’ Pledge of Fair Employment Practices [[4]].
Quantitative and Qualitative ESG Parameters
SingPost’s overall ESG score is 51 (above average), with detailed quantitative parameters including scope 1 and 2 emissions, energy consumption, and diversity metrics [[4]]. Qualitative parameters address ESG policy, TCFD framework adoption, scope 3 emissions capture, and carbon mitigation strategies [[4, 5]]. SingPost has set targets for carbon footprint reduction, corruption prevention, and regulatory compliance [[5]].
Financial Projections and Key Ratios
Maybank Research provides detailed financial projections for SingPost, including income statement, balance sheet, and cash flow data for FY23A through FY27E [[5, 6]]. Key ratios and growth metrics are also presented, covering profitability, DuPont analysis, liquidity, efficiency, leverage, and expense analysis [[5, 6]].
