Singapore Post Limited’s Stock Is Down 18% Over The Last 12 Months: Here’s Why
Singapore Post Limited (SGX: S08) is in the business of providing postal and logistics services. Most Singaporeans should be familiar with the company’s namesake mail service. The firm’s three business segments are postal, logistics, and eCommerce.
Over the last 12 months, Singapore Post’s stock price has declined by 18%. What may have caused this?
Reasons for a decline
There can be many reasons behind a stock’s price decline.
But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related. The former deals with how a stock’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock’s profits.
Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.
The case with Singapore Post
In Singapore Post’s case, I believe it’s the former at work. Here’s a summarised version of the company’s income statement for the quarters and years ended 31 March 2017 and 31 March 2016 to help justify my point:
Source: Singapore Post’s earnings release
We can see that despite a 17.1% increase in revenue for FY16/17 (fiscal year ended 31 March 2017), Singapore Post’s underlying net profit was down 24.7%.
Singapore Post is undergoing a change in its business model from its initial focus on providing postal services to providing integrated logistics services that power e-commerce activities.
So far, the company’s efforts have been met with obstacles. If you notice, Singapore Post’s net profit for FY16/17 was down by 86.6%. This was because of impairments to the value of certain acquisitions Singapore Post had made in its transformation efforts.
Over the long run, investors should focus on how well Singapore Post is integrating its acquisitions and executing on its long-term strategy of becoming an integrated logistics services provider.