10 Quick Things I Learned From Singapore Post’s AGM 2014

Last year, in 2013, Singapore Post caught my attention when they announced that they were partnering the global sportswear brand, Adidas, to power their e-commerce stores in Singapore, Malaysia, Thailand, Vietnam and the Philippines. Singapore Post would be in charge of web design, catalogue management, inventory management, returns and customer service integration for Adidas.

Another huge announcement came two months ago when the world’s largest e-commerce company, Alibaba, planned to take a 10.35% stake in Singapore Post. This could potentially become a game changer for Singapore Post whose traditional mail business has been declining for the past many years.

With these two collaborations and being ranked as the top postal agency in the world in an Accenture report last year, it looks as if Singapore Post is not content with just being the largest postal company in Singapore and is set on making a mark on the international scene.

As I’ve been taking a deeper look at Singapore Post recently, one of the ways to learn more about the company is by attending their annual general meeting (AGM) and listen to the questions posed by shareholders and the answers given by the management.

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So here I present to you the…

10 Key Takeaways I Learned From SingPost’s AGM 2014:

  1. When Singapore Post listed back in 2003, its stock was trading at 60 cents. Since then, SingPost has paid out total dividends of 80.1 cents. Including capital gains, every dollar invested in SingPost during its IPO would have grown to $4.325 today. That’s an accumulated return of 325% and a CAGR of 10.4%. The compound returns have been amazing for investors who invested for the long run.
  2. For the past eight years, a consistent annual dividend of 6.25 cents has been distributed to shareholders. Knowing that a lot of investors are attracted to its dividend payout, the management is committed to paying at least 5 cents in dividends per year. This is likely to continue to attract dividend-hungry investors.
  3. Traditional mail is a dying business; we only send an average of six letters a year. As we have switched our mode of communications to mainly electronic means, Wolfgang Baier, the CEO of SingPost, decided to venture out into e-commerce and which led to a series of business acquisitions in the past three years. The move not only mitigates the risk of its traditional mailing business weakening further, it also reduces the dependence on its domestic market Singapore. That speaks a lot about the management who isn’t blind to sitting idly on a burning platform.
  4. Despite having a monopolistic moat, Singapore Post continues to face a declining domestic traditional mail business. Because of that, its chairman recalled, “Ten years ago when SingPost went IPO, analysts were expecting profits of SingPost to drop to $85 million (from $109 million in profit after tax).” But in the past few years, Singapore Post has been successfully achieving profits of around $150 million. The moral of the story is to take analysts’ forecasts with a pinch of salt.
  5. Singapore Post had a vision to venture into e-commerce ten years ago but they couldn’t execute their plans well enough until recently when they found the right team. This was possible because of the CEO and the members he brought on board. They also attracted a new strategic partner, Alibaba which is a global e-commerce giant.SingPost’s chairman commented, “Jack Ma has told its people who told us that if they (Singapore Post) can solve the problem for them on logistical needs, Alibaba can do three times the amount of e-commerce profits.”Alibaba didn’t approach Singapore Post because they have the most handsome CEO in the world (the chairman joked), but rather on their international logistics capability. As Alibaba aims to tackle the Southeast Asian market, Singapore Post, which happens to be one of the best e-commerce logistics company in Asia, became their strategic partner.
  6. With their tremendous logistical needs, Alibaba is a demanding partner, but the expectations are advantageous for a simple reason – it lifts the standards of Singapore Post to a whole new level. With the support from Alibaba, SingPost’s moat will strengthen further making it harder for other players to compete with them.
  7. Past investments in their logistics business segment produced only a single-digit operating margin (despite an asset base three times larger than their assets in their traditional mail business segment). In comparison, operating margins in their traditional mail business were above 30%. Due to the thin operating margins, for every dollar of revenue lost from its traditional mail business, the company must bring in an additional five dollars from other segments to compensate. The management commented that investments in logistics and e-commerce are still at their initial phase and they are likely to take a few years to mature.
  8. Singapore Post invested in a Malaysian listed company, GD Express, four years ago. That stake is now worth six times more than the initial investment with estimated profits at $130 million (according to management). If you refer to Page 129 of SingPost’s 2014 annual report, their investments in listed associated companies have a carrying value of S$38.4 million instead of its actual market value of S$155.7 million. In other words, SingPost is sitting on assets worth more than the figure stated in the balance sheet.
  9. The core value of Singapore Post is to always do what is best in the long run. It’s important to have a management team who focuses on long-term rather than short-term results.
  10. Singapore Post has been around for 150 years. Today the company faces declining mail volume and operates in highly competitive logistics and e-commerce environments. Despite that, its chairman envisions staying for another 30 years to see Singapore Post continue to grow.Thirty years from now, he hopes to say, “Once upon a time, I used to work there and they continued to grow. I remembered when they were very small, only $3.3 billion in market capitalization, now look at them…”It’s important to have management who not only dare to have big dreams, but also have the ability to turn those dreams into reality.

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Rusmin Ang is an equity investor and co-founder of The Fifth Person. His investment articles have been published on The Business Times BTInvest section and Business Insider. He has also been featured multiple times on national radio on 938LIVE for his views and opinions on how to invest successfully in the stock market. Rusmin is on the speaking circuit for CIMB Securities (Malaysia) and has spoken at events in Penang, Sibu and Kuala Lumpur and is the co-author of Value Investing in Growth Companies published by Wiley, Inc. The book can be found in all major book stores worldwide and on Amazon.com, Barnes & Noble and Apple’s iBooks. Rusmin was actually a former SIAEC scholar who gave up his scholarship and a cushy career to follow his itch of learning how to be a better investor and ultimately lead a life of financial independence. He believes that anyone, even with a regular job, can achieve more financial peace-of-mind by investing intelligently and safely for the long term.

2 Comments

  1. Daniel

    July 14, 2014 at 10:17 pm

    How do you value this company? Is it possible to buy now?

    • Rusmin Ang

      July 16, 2014 at 11:27 am

      Hey Daniel,

      Haha! That’s the million-dollar question but I am afraid I can’t give you an answer as we do not make any stock recommendations.

      However, if you’re seeking dividend income, I could offer a couple of questions to guide you with your decision-making process:

      Without taking into account future growth, SingPost has already hinted that they will continue to pay a minimal annual dividend of 5 cents per share. So…

      1. What is your expected dividend yield as an investor?

      2. Does SingPost’s dividends at its current stock price match your expected dividend yield?

      If so, that’s great. If not, you might want to consider waiting for SingPost to come down in price (but who knows when?). Either way, it is your choice to make! 🙂

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