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Following drop in 1Q earnings, SingPost steps up share buybacks

Chan Chao Peh
Chan Chao Peh • 3 min read
Following drop in 1Q earnings, SingPost steps up share buybacks
SINGAPORE (Aug 13): Postal and logistics operator Singapore Post has been steadily buying back the company’s shares. On Aug 6, it bought back 290,000 shares at prices ranging from $1.24 to $1.27 each. The purchase was made three days after the company r
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SINGAPORE (Aug 13): Postal and logistics operator Singapore Post has been steadily buying back the company’s shares. On Aug 6, it bought back 290,000 shares at prices ranging from $1.24 to $1.27 each. The purchase was made three days after the company reported 1QFY2019 earnings that were 40.4% lower y-o-y.

Earlier, on July 19, SingPost bought 790,000 shares at prices ranging from $1.33 to $1.34 each. On July 16, it bought 800,000 shares at between $1.32 and $1.34 each.

These few rounds of purchases totalling 1.88 million were made on the basis of the company’s new share buyback mandate, which took effect on July 11. Under the current mandate, SingPost can buy back up to 226.4 million shares. The shares bought back are held under the company’s treasury shares, which amounts to 13.5 million to date. SingPost has a total share base of 2.26 billion shares.

On Aug 3, SingPost announced earnings of $18.7 million for the three months to June 30, down from $31.4 million in the year-earlier quarter. The bottom line was hit by exceptional fair value losses that SingPost had to book for an associate. Revenue in the same period was up 3.3% y-o-y to $372.6 million.

The company enjoyed higher international parcel volume during the period. Additional e-commerce-related deliveries within Singapore helped as well. However, margins for international traffic were compressed. That led to a 3.8% y-o-y drop in operating profit for the post and parcel division.

The other major business line, logistics, saw its revenue drop 2.2% y-o-y, owing to lower freight forwarding volumes. The e-commerce segment, meanwhile, suffered a 4.3% y-o-y drop in revenue, which the company attributes to changes in the business mix.

As a whole, SingPost’s earnings could have been higher if not for ongoing efforts to restructure its US businesses, which were acquired by the previous management team. The company’s focus, according to analysts, will be to make previous acquisitions work. “Following a three-year period of capital expenditure and acquisitions, SingPost is likely to see muted investments and mergers-and-acquisitions activity in FY2019, with an emphasis on scaling up its existing businesses,” states DBS in its Aug 6 report.

The company is optimistic it will benefit from positive global e-commerce trends. E-commerce-related revenue from across the segments rose 8.8% y-o-y to make up more than half, or 53.7%, of the company’s total revenue.

“As strong growth in global e-commerce drives cross-border and last-mile deliveries, we are focused on executing well to keep up our operational momentum as we transform SingPost for the future,” says group CEO Paul Coutts.

OCBC analysts share Coutts’ optimism. “SingPost is well-positioned to benefit from the strong growth in global e-commerce and last-mile deliveries, but time is also required for the execution of plans and synergies to be reaped,” says OCBC in its Aug 6 note. “The US market remains challenging, and the group continues to focus on its turnaround plan and the coming peak season. Still, we are positive on the group’s longer-term prospects.”

Thanks to higher rental and occupancy at its newly renovated SingPost Centre retail mall, operating profit for the property segment helped drive a 67.1% y-o-y increase in rental income. As at June 30, the mall had a committed occupancy rate of 96.7%.

For the quarter, SingPost declared a dividend of 0.5 cent a share. This dividend will be paid on Aug 31. The company has a dividend policy of paying out between 60% and 80% of its earnings quarterly. DBS expects SingPost to pay about four cents a share for the current financial year.

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