SHARES of Singapore Post : S08 +2.06% (SingPost) rose at Tuesday&rsquo s (Sep 19) open after the group announced it was introducing a significant rate increment for the first time in almost a decade.

 

From Oct 9, standard regular mail rates will be increased by S$0.20 or 65 per cent to S$0.51 from the current S$0.31. The last significant rate increment was in 2014, when postage increased to S$0.30 from S$0.22.

 

Ahead of market hours on Tuesday, the postal service provider said its latest rate increment reflects the escalating costs of maintaining the postal service.

 

&ldquo SingPost has been absorbing inflationary costs and essentially kept our postage rates constant since 2014. With the intensifying cost pressures and challenging business landscape, it is inevitable that we raise our prices to remain commercially sustainable so that we can continue providing the essential postal service for the nation,&rdquo said the group' s Singapore chief executive, Neo Su Yin.

 

The move comes amid a global structural decline in postal volumes over the last decade, which SingPost attributed to digital disruption which impacted the commercial viability of postal firms globally.

 

It noted that its mail volumes have declined more than 40 per cent between FY2018/19 and FY2022/23.

 

For the fiscal year ended March 2023, SingPost&rsquo s post and parcel segment revenue amounted to S$521.3 million, comprising over a third of the group&rsquo s full-year revenue.

 

This also marked a 16.2 per cent year-on-year decline from the previous year&rsquo s topline, bringing the segment to its first-ever full year operating loss of S$15.9 million.

 

Revenue contributions from the domestic post and parcel fell 9.3 per cent on the year, while international post and parcel revenue fell 20.5 per cent.

 

While the group said it &ldquo made inroads&rdquo with e-commerce volumes over the year, it noted that the progress was not enough to offset the impact of mail declines.

 

SingPost said the rate adjustment will help address the loss caused by a persistent decline in postal volumes coupled with costlier labour, utilities, fuel, and higher conveyance expenses.

 

&ldquo This rate increment is necessary for SingPost to continue serving its obligations as Singapore&rsquo s public postal licensee while allowing further exploration of a more sustainable postal business model in the long term, balancing the need to remain viable while safeguarding the interests of its shareholders,&rdquo added the group.

 

SingPost will also issue a first local stamp booklet of 10 stamps from end-October to each household to help manage the postage increase.

 

Going forward it will further introduce changes to simplify the domestic postage rate structure, including the elimination of the weight criteria.

 

This is expected to make postal services more user-friendly by enhancing the customer experience and provide greater convenience, it said.

 

Earlier in July, Minister of State for Communications and Information Tan Kiat How announced in parliament that adjustments to domestic postage rates will have to be of a &ldquo sufficient degree to allow SingPost&rsquo s business model to remain viable, without requiring direct government funding&rdquo .

 

The Infocomm Media Development Authority (IMDA) is in the midst of conducting a review into SingPost&rsquo s costs and operations.

 

While Lim & Tan Securities acknowledges that the impending rate hike is &ldquo a much-needed shot in the arm&rdquo for the group&rsquo s postage business, the research house does not think it will be sufficient to address the structural decline in mail volumes and business.

 

This is given the &ldquo existential threat&rdquo to the group&rsquo s mail business posed by digital disruption, said Lim & Tan&rsquo s research team in a Tuesday report.

 

&ldquo We believe the strategic review would be more important to address the valuation issue of SingPost.&rdquo  

 

At the stock&rsquo s Monday closing price of S$0.485, the brokerage noted that SingPost is valued at S$1.1 billion and trades at a consensus forward price-to-earnings ratio of 24 times. This implies a dividend yield of 1.2 per cent and a price-to-book ratio of one time.

 

Lim & Tan noted that Bloomberg&rsquo s consensus one-year target of S$0.52 implies a potential upside of just 6.1 per cent.

 

CGS-CIMB, however, upgraded its rating on SingPost to &ldquo add&rdquo from &ldquo hold&rdquo , while lifting its price target to S$0.60 from S$0.52 to factor in the higher postal rate assumptions.

 

The brokerage has assumed a 50 per cent hike in the group&rsquo s base rate effective FY2023/25, which would translate to an annual Ebit (earnings before interest and taxes) uplift of about S$20 million.

 

&ldquo We think the upcoming postage rate hike could help SingPost plug its widening postal losses, enabling investors to focus on its growing logistics business,&rdquo said analyst Ong Khang Chuen.

 

Beyond this, Ong also believes the group&rsquo s FY2023/24 earnings recovery will be anchored by the group&rsquo s international business &ndash with its recent introduction of cross-border offerings to boost customer acquisitions and enable SingPost to better manage its margins for this business.

 

CGS-CIMB estimates there are S$1 billion worth of non-core assets that are &ldquo ripe for capital recycling&rdquo , including SingPost Centre and minority-stake investments.

 

&ldquo We also believe SingPost should consider leveraging third-party capital to scale its fast-growing Australian logistics business and unlock shareholder value,&rdquo said Ong.

 

He values the group&rsquo s key unit in Australia, Freight Management Holdings, at between S$750 million and S$1.1 billion. 

 

Postal service provider is first SGX-listed large-cap to report metrics for non-traditional gender identities

 

SINGAPORE Post (SingPost) has blazed a trail for diversity, equity and inclusion (DEI) practices in Singapore, becoming the first major listed company to measure and report non-binary gender statistics.

 

In its sustainability report for the year ended March 2023, SingPost added the category &ldquo Non-binary, gender diverse or unknown&rdquo for statistics on the gender composition of its workforce and on training hours. The report stated that 55.5 per cent of the company&rsquo s employees were male, 44.1 per cent were female, and 0.1 per cent were non-binary, gender diverse or unknown.

 

Checks done by The Business Times show that SingPost is the only one among the 50 largest companies by market capitalisation &ndash as at Aug 24 &ndash listed on the Singapore Exchange (SGX) to disclose non-binary gender statistics. A spokesperson from SingPost said that the company established its diversity and inclusion policy in the 2022 to 2023 financial year, and included non-binary as a category to &ldquo promote greater inclusiveness&rdquo .

 

However, the postal service provider declined to comment or share details about how the decision to include the statistic came about.

 

The push for greater recognition of non-binary gender identities has been a slow but growing movement globally, especially in developed markets like the United States and the European Union. An Ipsos poll of 22,514 adults from 30 countries in the first quarter of 2023 showed that 3 per cent of respondents did not identify as either male or female. That 3 per cent included those who identified as transgender, non-binary, non-conforming or gender-fluid, or anything other than male or female.

 

Sustainability-related reporting standards mostly do not address gender identities directly. For instance, the widely used Global Reporting Initiative (GRI) standards on diversity and equal opportunity require that companies disclose gender metrics, but not whether those metrics should include non-binary identities.

 

SingPost&rsquo s move puts it in an exclusive club of companies worldwide. Globally, companies that report non-binary gender figures include tech giants Google and Salesforce and HSBC bank.

 

Tech corporations Meta and Apple have publicly either acknowledged that gender is not binary or rolled out initiatives in support of non-binary people, although they have not made non-binary disclosures in their annual diversity reports.

 

In Asian markets, including Singapore, non-binary gender recognition has not been as prominent an issue. While there has been a growing demand from policymakers, investors and consumers for companies to implement policies and programmes to promote greater diversity, especially at the senior management level, the key diversity metric in the Asia-Pacific region is still on increasing female representation on corporate boards, said Kim SK, vice-president for Asia-Pacific ESG and climate research at MSCI.

 

A spokesperson for ESG ratings provider Sustainalytics said that non-binary-related corporate disclosure is still low. &ldquo This could be related to the options in a corporate survey or a hesitancy in some cultures for non-binary employees to disclose openly.&rdquo

 

But SingPost&rsquo s move may be an indication of the growing importance of non-binary disclosures, which may one day be a diversity metric that ESG ratings companies look out for.

 

Sustainalytics said it views companies working towards inclusion of non-binary gender as an appropriate indicator under DEI inclusion disclosures and hopes to see more companies disclosing &ldquo a broader scope of gender&rdquo even as the ESG ratings provider continues to advance its DEI reporting indicators.

 

David Smith, senior investment director of Asian equities at abrdn, said that companies are already making more disclosures on diversity metrics as they respond to investor interests and regulatory requirements.

 

However, he noted that diversity reporting is &ldquo far from straightforward&rdquo , even as a growing number of companies are recognising that traditional gender categories may not be sufficient to fully communicate diversity at a company.

 

&ldquo This development would appear to be consistent with that view, and is, I suspect, something we&rsquo ll see more of in Asia,&rdquo Smith said.

 

The immediate benefit for companies making such disclosures would be the ability to attract and retain talent.

 

Smith said abrdn believes companies that embed diversity and inclusion standards are better placed to attract talent, get the most from their workforce, and meet the needs of their customers.

 

&ldquo If the company is perceived to be welcoming and open-minded, no doubt it is easier to attract talents even though other elements like compensation may be a bit short,&rdquo said Gabriel Nam, partner at human resources consultancy Page Executive.

 

However, Nam noted that any commercial impact or financial returns would likely not occur overnight. There are also no reporting requirements by SGX to report on non-binary gender statistics.

 

&ldquo But if the company has a vision to move ahead of their industry fellows or competitors, and foresee that eventually it may become a compliant requirement, then of course the company will enjoy the headstart,&rdquo he added.

 

Companies that recognise greater gender diversity may also cater to broader viewpoints and ideas when making business decisions or developing strategies.

 

While financial returns are still the priority for investors, ESG considerations are becoming increasingly important, especially impact investors, who are keen on measuring and assessing social impact, Nam said.

 

THE substantial shareholder of Catalist-listed ICP : 5I4 0%, Aw Cheok Huat, has amassed more than 50 per cent of the total number of shares in the company, turning his offer unconditional in all respects.

 

ICP on Friday (Aug 18) announced that he received valid acceptances amounting to over 178.1 million offer shares, or 5.34 per cent of the total number of shares, as at 6 pm on Thursday.

 

This brought the shares that he and his concert parties owned, controlled or agreed to be acquired to 50.98 per cent.

 

Aw launched a mandatory conditional cash offer for ICP shares at S$0.007 apiece on Jul 11, after acquiring an additional 773.2 million shares.

 

Before the offer was announced, the shares he already owned and controlled, including those which were agreed to be acquired by him and his concert parties, made up 45.64 per cent of the total number of shares.

 

Despite the offer turning unconditional, the offeror does not intend to extend it beyond 5.30 pm on Aug 29.

 

The offer will not be open for acceptances beyond that time on that day, said the filing.

When Vincent Phang joined SingPost to take charge of its local business in 2019, he was well aware of the structural decline of domestic mail whose volume hit a peak a decade ago. Phang, who holds a post-graduate diploma in flight test engineering, figured there should be a &ldquo glide path&rdquo of seven or eight years, buying time for him to lead the company&rsquo s further doubling down on logistics.

 

Unfortunately, because of the pandemic, Phang is all hands on the yoke. The decline in postal volume has accelerated sharply and what was once the core business &mdash and cash cow &mdash of SingPost is now a loss-making unit. Phang, who took over as the group CEO in September 2021, now has a more pressing challenge on hand.

 

For its most recent FY2023 ended March 31, SingPost&rsquo s post and parcel segment suffered its first-ever full-year loss of $15.9 million, compared to a profit of $24.9 million for the year before, hit by a combination of higher costs even as volume declined at a quicker pace.

 

So unfeasible was the postal business that the government, which gave SingPost the monopoly rights to provide basic mail services &mdash specifically, access to all letterboxes &mdash has been asked to step in and review SingPost&rsquo s costs and operations, including hiking postage rates, to make this a more viable business to continue with.

 

Phang, citing the ongoing review, which is to be completed &ldquo well within&rdquo the current FY2024 ending March 2024, declined to share more details on what kind of adjustments will make sustainable commercial sense. He is clear, however, that the 165-year-old company he now leads is writing one of its more remarkable chapters. &ldquo It has been a very interesting time for SingPost,&rdquo says Phang in an interview with The Edge Singapore.

 

News of the strategic review, when first announced on May 11, briefly sent SingPost shares surging. Before that, the shares had dropped by 76.2% from their peak of $2.14 back in late January 2015. Year-to-date, the shares have fallen by 1.9%. SingPost shares closed at 51 cents on July 20, valuing the company at more than 80x historical earnings, and according to Bloomberg data, 23.2x forward earnings

 

Complementary logistics

 

For now, Phang will not be drawn into discussing the quantum of the postage hikes, other than that SingPost is running through scenarios with the government. He is clear, however, that doubling down further on the logistics business &mdash with plenty of complementary elements with post &mdash is something SingPost wants to do.

 

Logistics is not new to SingPost, but up till just before the pandemic, this business segment had been a &ldquo fledgling&rdquo one and not contributing meaningfully to the overall bottomline, says Phang.

 

The disruption caused by the pandemic meant SingPost had to bear with much higher operating costs for its domestic mail business. Unfortunately, it cannot just walk away as this responsibility of making last-mile delivery to the letterbox comes with the monopoly. &ldquo We&rsquo ve managed to serve the country, but that came at a great cost,&rdquo says Phang.

 

At the same time, the surge in e-commerce-related deliveries made it clear this had to be the &ldquo good balance&rdquo to offset the drop in mail, says Phang. Today, the logistics business is a major contributor to SingPost&rsquo s bottomline. Of the $1.9 billion in total revenue for FY2023 &mdash a record &mdash 70% came from logistics, versus just 38% back in FY2020. More importantly, logistics contributed 90% of the total operating profit. &ldquo I think the value of the pivot to logistics may not be as adequately recognised by the market,&rdquo says Phang. For FY2023, the company, as a whole, reported earnings of $24.7 million, down 70.3% y-o-y. It plans to pay a total FY2023 dividend of 0.58 cents. As recent as FY2016, it paid 6.5 cents per share.

 

It is easy to chart a new direction, but the tough work is in the actual implementation. Phang is careful to keep his feet grounded, literally. In an effort to better understand the nuts and bolts, as part of his grand ambition to be a regional or even global e-commerce supply chain player, Phang made some deliveries himself. &ldquo It takes six seconds to deliver to the letterbox but six minutes to the door,&rdquo he recalls.

 

The move to go big in logistics is already underway. Back in October 2020, SingPost took a 38% stake in Australia&rsquo s Freight Management Holdings (FMH) for $84.1 million. The stake was eventually raised to 51% just over a year later and to a further 88% this January.

 

Phang explains the acquisitions were done in incremental steps so that SingPost can better refine the strategies to be deployed and how this business in Australia should be run. When asked, he says it is a &ldquo matter of time&rdquo before SingPost fully acquires FMH.

 

A reason it has yet to do so is that he wants to be &ldquo very disciplined&rdquo and not be pressured into making acquisitions just for the sake of growth. Thus far, he is encouraged by how FMH has not only grown organically, but also made &ldquo disciplined, targeted&rdquo acquisitions of its own, such as CouriersPlease, a first- and last-mile delivery courier network. These two entities combined generated revenue of $815 million, or 44% of SingPost&rsquo s total.

 

Beyond the current overseas focus on Australia, Phang says North Asia, with China as a huge exporting market, is another region SingPost cannot ignore if it wants to be a regional e-commerce logistics service provider.

Alluding to SingPost&rsquo s Quantium Solutions unit, which has built up a &ldquo reasonable&rdquo Southeast Asian footprint, Phang says that is a foothold he already has in developing further capabilities, entrenching the company deeper in latching on the growth.

 

&lsquo Asset appropriate&rsquo businesses

 

Unlike under the previous management teams when SingPost made a quick series of acquisitions, Phang is adopting a more careful and deliberate stance. He prefers to make alliances and partnerships, and work on the &ldquo competitive advantages&rdquo that all parties may bring to the table.

 

One recent example is an MOU signed on July 4 with Sats to explore a potential joint venture to operate an e-commerce transshipment hub in Singapore. &ldquo If you put two businesses together and work on the competitive advantages that each business brings to the table, I think we can achieve a lot more scale growth and over a shorter period of time,&rdquo he reasons.

 

Phang agrees that some of the previous acquisitions made under his predecessors ended up as futile attempts to grow, even though the broader direction of moving into logistics is similar. &ldquo If they don&rsquo t work out, we will rationalise them,&rdquo he says, citing SingPost&rsquo s divestment of its loss-making US subsidiaries in April 2019.

 

&ldquo I believe it&rsquo s very important, given how logistics have moved so rapidly over the last few years, to really take stock of our own stables. We have to look at what we have, whether it&rsquo s still relevant to the strategy going forward,&rdquo he adds. &ldquo But among the acquisitions that we have made, those that we have at this moment are all profitable.&rdquo

 

Given the more pressing hand he is dealt with, it is not good enough for Phang if the various businesses are merely profitable running on their own. He wants to take it a step further by asking how SingPost can get the best returns out of them.

 

In other words, if the businesses cannot help SingPost become a regional or global e-commerce logistics supply chain player, they will be deemed &ldquo non-core&rdquo and sold off and the capital recycled. What guides the review is instead whether or not the businesses are &ldquo asset-appropriate&rdquo for itself, its customers and its alliance partners, says Phang.

 

On July 17, SingPost announced it has appointed Merrill Lynch (Singapore) or BofA Securities to undertake this review. &ldquo We want to create options for us, so that we can be disciplined about deploying capital in a way that achieves the greatest return for our shareholders,&rdquo says Phang. &ldquo Ultimately, what we want through the strategic review is to ensure that every underlying business that we have within the group is appropriately valued,&rdquo he adds.

 

Despite the challenges of the letterbox, SingPost is not about to abandon the post and parcel business just yet. Phang reiterates that he takes his obligations as the designated postal licensee &ldquo very seriously&rdquo , and is looking for ways to reconcile a future where e-commerce might be the defining user experience for the group with the relevance of the postal-infrastructure postal system.

 

When pressed again for more details on the postage hikes &mdash the basic rate for local delivery starts at 31 cents &mdash Phang explains that this move is &ldquo essential and critical, but it needs to be accompanied by more radical, more fundamental structural changes&rdquo &mdash a process that has now involved the government.

 

For example, issues to be addressed include whether SingPost can reduce the number of post offices, and to &ldquo recalibrate and review structurally the entire system&rdquo it now runs. &ldquo It sounds like a lot of big words, but there are tangible workflows behind it and we are looking at every individual element,&rdquo says Phang.

 

He adds: &ldquo We are focused on making the postal service relevant. We are focused on making the postal service sustainable by working in tandem with the developing trends in e-commerce deliveries. We are looking at the infrastructure being the element of delivery going forward, that helps to not just provide the customer experience but mitigate the cost increases as well.&rdquo