Singapore Post (SingPost) has announced that it will be working on five key strategic thrusts upon the completion of its strategic review. The strategies will be executed over the next three years, says the group.
The review was initiated in May 2023. Merrill Lynch (BofA Securities) was appointed as the financial advisor to enhance shareholder returns and to ensure that the group is appropriately valued.
Under the strategies, the group will be reorganised into three business units – Singapore, Australia and International. Each business unit will have the “agility and empowerment” to operate in their own markets and build on their core capabilities according to their individual strategies.
According to SingPost, the reorganisation will provide clarity on the valuation of the individual businesses against comparable market and sector ratings among other things.
In Singapore, the unit will focus on being the country’s market leader in deliveries as it seeks to capture the growth of e-commerce logistics within the city-state.
The group will also aim to achieve scale in its Australia business unit, strengthening its position as one of the top five logistics companies in the country. The move will leverage the asset-light hybrid fourth-party logistics (4PL) and third-party logistics (3PL) capabilities.
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In Australia, SingPost will explore near-term partnerships that “contribute to growth, provide equity to deleverage acquisition debt and establish an independent valuation benchmark”. It will also explore mergers and acquisitions (M&As) and seek future liquidity options to maximise value.
Its international business unit will focus on its cross-border e-commerce customers through an asset-light model and its 4PL platform, ARRIV. ARRIV was launched in the last quarter of 2023 to enhance customer experience, strengthen its partnership network, and achieve operational excellence in international connectivity.
The group will also explore options across key geographies to enhance the e-commerce supply chain network, expanding the hubs in Singapore, Hong Kong and Europe.
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Capital management
In addition, the group will continue to actively manage its capital with each business unit having a target to generate a spread above the cost of capital.
In its March 19 statement, the group says it has already identified a list of assets and businesses that are non-core to its strategy, which can be monetised to recycle capital. These assets include selected properties as well as assets in its international portfolio. The potential proceeds will be used to reduce debt, support growth investments, and return value to shareholders.
The timing of any potential divestments will be subject to market conditions.
In view of its transformation, SingPost will adopt a dividend policy of paying out between 30% to 50% of its underlying net profit from FY2024/2025 onwards.
The group had a payout ratio of 40% for FY2023, but had a payout ratio range of between 50% to 79% from FY2017 to FY2022 except FY2020, when it paid out 40% of its underlying net profit.
According to the group this is a “balanced policy” that takes into consideration the capital needs of the enterprise and sustainable returns to shareholders.
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“Following consultation with BofA Securities, the board is of the view that the share price of the Group does not appropriately reflect the intrinsic value of the company. This is particularly apparent considering the value of the SingPost Centre, the group’s Australian business and the group’s growth potential,” says Simon Israel, chairman of SingPost.
“We have progressively transformed from a traditional postal organisation to a logistics enterprise and are well positioned to leverage eCommerce logistics growth trends to scale our businesses. We are focused on executing our strategic thrusts to create market leadership, orientate to growth and generate shareholder value,” adds Vincent Phang, group CEO of SingPost.
Shares in SingPost closed at 38 cents on March 18.
