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NRA Capital Pte Ltd

Written by: Jacky Lee

Thursday 29 May 2014

SingPost – Alibaba to buy 10.4% stake in Singapore Post

A win win deal

Investment by Alibaba Group enables SingPost to significantly scale up its regional capabilities and infrastructure to meet growing e-commerce demand

Singapore, 28 May 2014 – Singapore Post Limited (SingPost) and Alibaba Group Holding Limited (Alibaba Group) today announced that SingPost and Alibaba Investment Limited, a wholly-owned subsidiary of Alibaba Group Holding Limited, have entered into an investment agreement under which Alibaba Investment Limited will invest S$312.5m to purchase 30 million existing ordinary shares held in treasury by SingPost and 190.096 million new ordinary shares and take a 10.35% stake in SingPost upon completion. Both companies also signed a memorandum of understanding (MOU) which will allow them to discuss and negotiate a joint venture (JV) in respect of the business of international e-commerce logistics. This strategic business cooperation will also tap into other e-commerce opportunities in Southeast Asia and beyond by providing amongst other things, greater access to SingPost’s international logistics capabilities, infrastructure and delivery networks, and end-to-end solutions to Alibaba Group customers and merchants.

SingPost is a leading provider of e-commerce logistics solutions and trusted communications in the region. As the national postal service provider in Singapore for over 150 years, SingPost offers integrated trusted communications through its domestic and international postal services and a suite of cutting-edge digital solutions for businesses and consumers. With its regional network and infrastructure, SingPost is able to offer fully integrated e-commerce logistics solutions covering freight transportation, warehouse fulfilment, delivery and returns as well as web solutions, to its customers. SingPost’s e-commerce and related businesses currently account for about 26% of its total revenue.


We believe the deal is significantly positive to SingPost as it has been facing a bottleneck in its organic growth amidst a continuing declining in mail volumes. Despite its successful transformation to become a leading e-commerce logistic player, the tough operating environment has lowered its net profit margins from 31% in FY03/08-10 to 21% in FY03/13.

At S$1.55, SingPost trades at 23x historical PER and 20x consensus FY03/15 PER, with 3.8% yield and its strong free cash flow of about 10 cents per shares. Short-term, we think it is fairly valued. Long-term catalysts including the successful scale up of its regional capabilities with Alibaba. According to industry studies, e-commerce sales in the Asia-Pacific region is expected to grow to more than US$1 trillion by 2020.


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