Singapore Post Limited

Singapore Post

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Singapore Post

 Stock Code  : S08

Stock name : Singpost

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 The business views itself in 3 sectors divided into mail, logistics, and retail derived from the annual report of 2012. The legacy of the business allows it to separately list property as an item of the business.

 Singapore Post, Analysis

The topline revenue rose from the period FY2007 SGD$436 million to the FY2012 SGD $578.5. This is supplimented by the other incomes, rental and property related. The initial glance showed that Singapore Post appears to be doing well, as it appears that the financial crisis of 2008 does not even give a dent on the topline.

The EBIT excluding associates and joint ventures appears to have paused. FY 2012 EBIT was SGD$173 while FY2011 EBIT was SGD $195.6. This is attributed to rise in cost outrun the rise in revenue. Time will tell if this will become a trend.

Singapore Post derived majority of its revenue from mail and logistics business which is built on the basic mail business. The capital expenses of the Singapore Post to conclude that the business has not invested in expansion. This give an impression that the management is in dilemma of what next.

The business is generating healthy operating cash, expending cash investing in itself and as much as to its associates. The financing cash indicated that Singapore Post took out a SGD$200 million fixed rate notes in FY2010 and issued an additional SGD$345.6 million in perpectual securities in FY2012.

These notes and perpectual securities, however, appear to sit idle in the tilt as is cash balance went from FY2009 SGD 139.5 million to FY 2010 SGD 390.2 million (the year Singapore Post took notes) and FY2011 SGD 338.7 million to FY2012 SGD$617.4 million.

The good thing to say is that it appears that interest costs on these cash is quite low. However, its not doing shareholders favour by not putting the money to use, unless the management wants the cash for an acquisition in the coming down market.

Singapore Post, Conclusion

That using the Boston Consulting Group Growth Share Matrix way of evaluating, Singapore Post appears to be a cash cow. It is the dominant player in Singapore and is generating cash from operations. The beauty with having a cash cow in the portforlio would moderate the portfolio beta closer to zero.

However, like cows, it face the danger of being slaughtered for food. The slaughter comes in 2 ways; upside is somebody would  acquire it; downside is some disruptive cultural behaviour shift will make the business irrelevant if the management fails to see it coming.

At market close, today, Singapore Post trades at $1.205 (14 Feb 2013) giving a PE ratio of 16 (using FY2012 EPS as denominator).

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