Introduction to Singapore Post (SPOST)

Singapore Post (SPOST), the national postal service provider in Singapore, offers a broad range of domestic and international postal and courier services. The company also provides end-to-end integrated mail solutions, including data printing. With its core business deeply rooted in logistics and mail operations, SPOST has been making strides toward optimizing its portfolio through strategic divestments.

Stock Overview

The company’s stock currently trades at S\$0.545, with a target price set at S\$0.72, reflecting a potential upside of 32.1%. SPOST’s major shareholders include Singtel (22.0%) and Alibaba Group (14.6%). Its FY25 NAV/Share is S\$0.63, and the FY25 Net Debt/Share is S\$0.25. The stock has shown resilience with a 52-week high/low of S\$0.60/S\$0.37.

Recent Developments

Management Shakeup

SPOST recently terminated its Group CEO (GCEO), Group CFO (GCFO), and the CEO of its International Business Unit (CEOIBU) due to whistleblower allegations. Investigations revealed that three business managers in the IBU unit had manually updated parcel delivery statuses to avoid penalties, violating company protocols. Although the terminated executives were not directly involved, they were found grossly negligent in handling the matter, leading to a loss of confidence from the board.

Leadership Succession

Several new appointments have been announced to stabilize operations. The current CFO of SPOST’s Australia business will assume the GCFO role, while the ex-Singapore CEO will return as Group COO. Additionally, the head of SPOST’s South District IBU will act as the interim CEOIBU. Simon Israel, Chairman of SPOST’s Board, will provide increased oversight during this transition period.

Divestment Strategy: Unlocking Value

Sale of Australian Business

The sale of SPOST’s Australian business to Pacific Equity Partners (PEP) remains on track, with an extraordinary general meeting scheduled for February 2025. The transaction is valued at an enterprise value of A\$1.02 billion (~S\$897 million), translating to 7-8x EV/EBITDA. SPOST expects to receive A\$776 million (~S\$683 million) in cash, with a one-off gain of approximately S\$312 million upon completion. Half of the proceeds will be used to repay Australian dollar-denominated debt of A\$362 million (~S\$321 million), while a portion of the remaining funds may be allocated to a special dividend or future growth opportunities.

Potential Special Dividend

Analysts estimate that if the entire S\$362 million cash balance is distributed as a special dividend, shareholders could receive 16 S cents/share, yielding a 27% return. However, if SPOST opts for a more conservative approach by allocating S\$100 million, the dividend yield would be around 8% (4.4 S cents/share). The base case assumes that SPOST would maintain its FY26-27 dividends at the same level as FY25’s, supplemented by special dividends.

Future Divestments

SPOST remains committed to monetizing non-core assets, with Famous Holdings likely to be the next divestment target. Analysts value Famous Holdings at approximately S\$130 million, assuming a 5x EV/EBITDA multiple. The SingPost Centre is also estimated at S\$900 million, with a potential minority stake sale being the most probable route. These divestments are expected to unlock further shareholder value, although the timeline could be impacted by the ongoing management transition.

Financial Performance

The financial projections indicate robust growth in 2025, driven by the Australian business sale. However, revenue is expected to dip significantly in 2026 due to divestments, stabilizing thereafter.

Valuation and Recommendation

UOB Kay Hian maintains a BUY recommendation for SPOST with an unchanged SOTP-based target price of S\$0.72, implying a 1.0x FY26F P/B. The valuation incorporates the monetization potential of Famous Holdings and the SingPost Centre. Key catalysts for the stock include the successful divestment of non-core businesses, larger-than-expected special dividends, and earnings-accretive acquisitions. The change in top management is not expected to alter SPOST’s divestment strategy significantly.

Key Takeaways

• SPOST’s strategic divestments, particularly the Australian business, are on track to unlock substantial shareholder value.
• The company’s financial health remains strong, bolstered by the potential for special dividends and reduced debt obligations.
• Despite the recent management shakeup, SPOST’s long-term strategy remains intact, with new leadership poised to drive the next phase of growth.