Friday, November 4, 2016

Singpost Q2 - My thesis is challenged

i did not expect the dividends cut policy to be announced before the announcement of the CEO.

I shall not talk give a summary of the quarter report, readers can look at them themselves. There are several negatives in this report.

 

Of the above, the one that throw me off my comfort zone is higher cost in the e-commerce business. 

This cost, the "last minute fulfillment of labour" smell like poor execution by Global Trade, and the business in it US, I am not sure how much "control" singpost has. It's IT investment is going to continue since the Omni-channel technology need investment to get it ready for Singapore.

 

The logistic segment, which is the "crown jewel"  has stagnate even at "top line" level. Where is the "feeding through" of the jump in rev in e-commerce. 

There is clarity now with dividends, 60%-80% of underlying profits.

Looking at the scenario of EPS of 6 cents, 7 cents and 8 cents for this FY, we can work out the best case and worst case scenario of  dividends is 3.6 cents to 6.4 cents 

The best case scenario look quite palatable and if we factor in the growth in SP mall and cost snergy from 2017-2018, the dividends could be higher than 7 cents if we see growth of 20% from 2017-2018.

But that is the best case scenario. 

The next quarter will be D-day report card. Beside the usual Christian season, Alibaba has is eastern version of single day (figures are inflated, china business like to have phathom orders to boost their online ratings)

In the short-term, I see a sell-off on Monday. Hold tight.

Below is purely speculation:

During investor conference for last quarter, the covering CEO, mentioned that there is some discussion how Lazada can fit into the scheme of things. 

With the announcement of Lazada buying Redmart, with its distribution network of grocery, I wonder if there is any "breakdown" in value addedness of goods channeled through Singpost Network. If Lazada announce cross-carrying of products in redmart, then its BB.

Alibaba is not the key player in Singpost's fortune now. US subsidiaries and associates are.

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