Founded in 1819, Singapore Post (SingPost) has grown from modest beginnings into a leading provider of mail, logistics, and retail solutions in Singapore and the Asia-Pacific region. Over the years, SingPost has pursued various acquisitions to expand its reach beyond Singapore’s delivery network. However, these strategic maneuvers have struggled to generate substantial growth, instead increasing the burden on the business amid challenging macroeconomic conditions and declining postal deliveries globally.
Let’s face it—how many of us still send paper mail these days?
In Singapore, the volume of letter mail and printed paper fell by 8.1% year-on-year, from 95.6 million items to 87.8 million. Maintaining a postal business has become increasingly difficult as daily mail volumes shrink while operational costs continue to rise. In 2023, the cost of standard regular mail increased from 31 cents to 51 cents, reflecting the escalating costs of postal services. However, with the proliferation of technology, the perceived value of postage is expected to diminish even further, creating a pressing cost-demand dilemma for SingPost.
The Cost-Demand Dilemma and Strategic Shifts
To address these challenges, SingPost has opted to sell underperforming businesses, manage its financial position carefully, and preserve resources for more promising investments. This shift has led to significant transformations, as Group CEO Vincent Phang emphasized:
“We have progressively transformed from a traditional postal organisation to a logistics enterprise and are well positioned to leverage e-commerce logistics growth trends to scale our businesses.”
As part of its cost-saving measures, SingPost has closed 12 post offices over the past two years, leaving 44 in operation. These closures were offset by deploying over 100 POPStation parcel lockers, branded as POPDrop, which reduced rental and administrative expenses, thereby improving cost efficiency.
Following its 2023 strategic review, SingPost’s operations are now divided into three main business segments:
- Singapore business unit: It integrates the domestic postal and e-commerce logistics businesses into a single operation. It also has a property leasing business which comprises mainly SingPost centres, having a mixed use of retail, office and logistics spaces.
- The Australia business unit: Its businesses of Freight Management Holdings, CouriersPlease and Border Express will be integrated into a single unit to offer “a full suite of logistics services” which consists of management, distribution and warehousing of logistics.
- The international business unit: It manages cross-border e-commerce deliveries of mail and parcels, as well as warehousing services. It also has freight forwarding services globally.
Below is the operating results of each business segment as of H1 2024 and it is evident that the Australian business has been the growth driver:
Looking ahead, SingPost remains committed to its International Cross-Border Business, aligning with e-commerce logistics trends. Strategic partnerships and investments in technology have been instrumental:
- Cainiao Partnership: Combines Cainiao’s technology solutions with SingPost’s logistics network to enhance delivery efficiency.
- Google Cloud Collaboration: Reduced IT operation costs by 30%.
- Qazpost Partnership: Employs SingPost’s advanced logistics equipment in Kazakhstan.
- Other collaborations with Shein, SATS, and Lazada aim to improve delivery times and operational efficiency across Southeast Asia.
Sale of the Australian Business Unit
On December 1, 2024, SingPost announced the sale of its Australian business unit, including FMH, to private equity firm Pacific Equity Partners for S$700 million. Through its subsidiary SPAI, SingPost holds a 97.1% stake in FMH. The sale will generate a net gain of S$312.1 million, which will be used to deleverage acquisition debt and enhance shareholder value. Management has also hinted at the possibility of a special dividend for shareholders.
While the divestment results in the loss of a growth driver, it represents a positive step in unlocking value for SingPost. Although investors may prefer to see the company grow consistently, its expansion efforts have clearly fallen short of expectations. Pivoting towards divesting non-core assets and streamlining operations appears to be a more prudent strategy at this juncture.
SingPost’s share price has struggled since peaking in 2015, reflecting years of disappointing financial performance. However, news of the sale has provided a much-needed boost, with shares rising nearly 3% over the week. Management’s consideration of a special dividend further signals their commitment to delivering value to shareholders, offering tangible returns amidst the ongoing restructuring.
What else can SingPost sell?
One possible area is its investment properties, including its crown jewel, SingPost Centre at Paya Lebar. Valued at approximately S$1 billion, these properties generate rental income but are not essential to SingPost’s operations. Selling these assets could allow SingPost to adopt a more asset-light model while funding further growth initiatives or providing another bumper special dividend to shareholders.
As SingPost pivots toward e-commerce logistics, it is shifting from a reliance on retail post offices to a model centered around warehouses and unmanned POPStations. This transition not only enhances cost efficiency but also positions SingPost to compete more effectively with other logistics players.
While some investors may prefer growth-oriented strategies, SingPost’s focus on divesting non-core assets and optimizing operations is a pragmatic approach in the current environment. By streamlining its business, investing in technology, and leveraging strategic partnerships, SingPost is laying the foundation for a more sustainable future.
