What Investors Should Know About Singapore Post Limited’s Postal Business Performance
Singapore Post Limited (SGX: S08), or SingPost, is a mail and logistics company, organised into three major segments of Mail/Postal, Logistics, and Retail & eCommerce.
The company recently reported its second quarter result for the year ended June 2018 (2Q FY17/18). In this article, I will share a few points about the latest performance of the Postal business.
Source: SingPost 2Q FY17/18 Result Presentation
From the above, we can see that SingPost categorised its Postal business into three parts, namely domestic mail, international mail, and post office products and services.
Overall, we can see that this segment delivered quarterly growth in revenue and operating profit on a year-on-year basis. So far, so good.
Yet, digging further into the numbers, we can see that revenue growth was driven only by international mail. International mail revenue rose on the back of higher cross-border eCommerce deliveries, in particular with higher volumes from Alibaba Group Holding Ltd (NYSE: BABA).
Domestic mail, on the other hand, saw weaker revenue due to continued migration towards electronic statements and bills.
In terms of outlook, the company said the following:
“While the decline in domestic letter mail volumes is expected to continue, the Group is focused on growing the International mail segment to mitigate the drop in contribution from Domestic mail…
The International mail transhipment market remains highly competitive, and margins are relatively low. With the shift in mix towards lower margin International mail, blended Postal margin is expected to decline.”
In short, investors can expect the international business to grow going forward (albeit at a lower margin), offset by the decline in local business.