To The Moon

$SingPost(S08.SI)$ $DBS(D05.SI)$

A Small Trade With Symbolic Weight

On September 16, DBS Bank purchased 250,000 shares of Singapore Post (SingPost) for approximately S$110,000, increasing its stake to 0.062%. At first glance, the transaction is modest. Yet beneath the surface, it carries symbolic weight. When combined with stakes held by Singtel, Temasek’s overall deemed ownership of SingPost now stands at 22%.

Following the purchase, SingPost shares closed unchanged at S$0.43 on September 17. By the next morning, however, the stock edged 1.16% higher to S$0.435, hinting at renewed market interest. It was a small move, but one that came after two months of steady declines. Could this be the spark of a turnaround, or simply a pause before further weakness?

The broader question looms large: is SingPost still a company with a viable future, or is it inevitably shackled to a fading postal business?

SingPost: From National Institution to Investor Question Mark

For generations, SingPost was synonymous with communication in Singapore. In the pre-digital era, it was not just a company, but a national utility. Every letter, bill, and parcel passed through its network. For older Singaporeans, the brand is woven into daily life and nostalgia.

But nostalgia does not pay dividends. The relentless shift to digital communication eroded letter mail volumes across the globe. SingPost, like postal operators in the U.S., Europe, and Asia, has watched its legacy business shrink with each passing year.

The Pivot to Parcels and Logistics

To its credit, SingPost did not sit idle. Recognizing the rise of e-commerce, it sought to reinvent itself as a logistics and parcel delivery player. Investments in warehouses, cross-border shipping solutions, and regional logistics networks were made.

However, execution has been mixed. While parcel volumes have grown, profitability has lagged. SingPost faces stiff competition from both global logistics giants (DHL, FedEx, UPS) and nimble Asian challengers (SF Express, Ninja Van, J&T Express). Competing on scale and efficiency in such an environment is a tall order.

Investor Sentiment: Skepticism Prevails

For investors, SingPost has become a stock associated with structural decline. The dividend has been cut in recent years, earnings are volatile, and management turnover has occasionally unsettled confidence. The market has priced SingPost as if its best days are behind it.

Temasek’s Steady Hand

Despite this backdrop, Temasek’s involvement signals enduring institutional support. Through its holdings in DBS and Singtel, Temasek now indirectly controls 22% of SingPost.

This level of ownership is far from incidental. Temasek rarely holds such stakes unless it views a company as strategically important to Singapore. For comparison, Temasek has stepped in during crises for Singapore Airlines and provided long-term backing for DBS during the Asian Financial Crisis.

Why Support Matters

This does not guarantee investor profits. But for retail shareholders, Temasek’s support acts as a buffer against total collapse. The government-linked investor has little incentive to let SingPost fail outright, given its role in national infrastructure and commerce.

At a minimum, Temasek’s backing ensures SingPost has access to capital and credibility. The harder question is whether that support can translate into real transformation, or if it merely extends the decline of a legacy institution.

Can SingPost Stage a Re-Rating?

At S$0.43, SingPost trades near historical lows, reflecting widespread skepticism. For the stock to re-rate meaningfully higher, several catalysts must come together:

1. Parcel Division Must Scale Profitably It is not enough to chase e-commerce volume. Logistics is a scale business where margins are razor-thin. SingPost needs to prove it can grow parcel volumes without bleeding cash.

2. Operational Efficiency Domestic mail delivery remains a drag on profitability. Streamlining this legacy division while modernizing operations is critical.

3. Strategic Partnerships Alliances with major e-commerce platforms or logistics players could provide growth avenues. In the past, SingPost partnered with Alibaba, but results were mixed. Renewed partnerships may be necessary.

4. Dividend Stability Many investors historically bought SingPost for dividends. With payouts reduced, confidence has eroded. A credible path back to consistent dividends would restore some investor appeal.

Financial Backdrop: What the Numbers Tell Us

SingPost’s financial performance reflects its transition pains. Revenue has grown slowly in recent years, largely driven by parcels, but profitability has not kept pace.

• Revenue Mix: Letter mail continues to decline, while logistics now represents a growing share.

• Margins: Operating margins remain under pressure, with rising costs in the logistics division offsetting parcel growth.

• Dividends: Once considered a stable dividend play, SingPost’s payouts have been cut, disappointing income investors.

• Balance Sheet: Debt levels are manageable, but return on equity remains weak compared to regional logistics peers.

Valuation Metrics

At its current price:

• Price-to-Book (P/B): SingPost trades near book value, reflecting low investor confidence.

• Dividend Yield: Sub-3%, lower than Singapore’s REITs and utility peers, making it less attractive for income-focused investors.

• EV/EBITDA: On the higher side relative to its profitability, suggesting limited upside without margin improvement.

These metrics suggest the market has priced in structural decline, but not outright collapse.

Peer Comparisons: SingPost vs. Regional Players

Looking at logistics peers highlights SingPost’s challenges:

• SF Express (China): Has aggressively scaled cross-border and domestic logistics, with strong parcel growth and reinvestment strategy.

• Yamato Holdings (Japan): Maintains profitability with scale and efficiency in the Japanese parcel market.

• Kerry Logistics (Hong Kong): Focuses on freight forwarding and integrated logistics, with stronger returns on capital than SingPost.

Compared to these, SingPost appears smaller, less efficient, and more dependent on government-linked support.

Risks to Watch

1. Structural Decline of Mail – Letter volumes will continue to fall. Unless offset, this erodes cash flow.

2. Margin Pressure in Logistics – Competing with regional players could mean growth without profits.

3. Execution Risk – Management must balance modernization with efficiency. Past stumbles have hurt investor trust.

4. Dividend Uncertainty – Income investors may abandon the stock if payouts remain weak.

Verdict: Contrarian Play or Value Trap?

SingPost sits at a crossroads. On one hand, Temasek’s consolidated 22% stake signals strategic importance. Institutional support ensures survival. On the other hand, the structural headwinds facing postal services are undeniable.

For investors, the case is nuanced:

• Bull Case: Backing from Temasek, potential logistics growth, and valuation near historical lows suggest limited downside and contrarian upside.

• Bear Case: Structural decline, weak execution, and limited dividends mean the stock could remain a value trap.

Verdict: For now, SingPost looks more like a speculative rebound candidate than a long-term compounder. Investors seeking stable dividends or growth should be cautious. However, contrarian investors with high risk tolerance may view current levels as an entry point, provided they believe in a successful transformation of its logistics arm.

Conclusion: A Company in Search of Relevance

The symbolism of DBS’s small purchase lies not in its size but in what it represents: continued support from Temasek-linked institutions. Yet that support alone cannot guarantee a turnaround.

For SingPost to stage a true comeback, it must prove to the market that it is more than just a legacy postal operator. Success depends on whether it can evolve into a lean, competitive logistics player in an increasingly crowded market.

Until then, SingPost remains an institution at a crossroads — part national icon, part struggling business. Investors must decide if this is a patient turnaround story worth holding, or if decline is, in fact, inevitable.

Key Takeaways:

• DBS’s stake increase is symbolic, not transformative.

• Temasek’s 22% ownership provides stability but not guaranteed returns.

• SingPost’s future hinges on profitable logistics growth and efficiency gains.

• The stock is a contrarian speculative play, not yet a proven turnaround.