Parcel Expansion Will Drive E-commerce Hub Amid Margin Risks

Key Takeaways

• Strategic expansion in e-commerce logistics and digital automation positions the company for increased efficiency, service reliability, and sustainable revenue growth.
  
• Strong financial flexibility enables investment in high-margin services and property monetization, leveraging structural market tailwinds for long-term earnings potential.
  
• Divestment, ongoing losses in logistics, and an unprofitable postal core leave SingPost exposed to volatility, operational inefficiency, and uncertain future growth prospects.

Catalysts

Engages in the post and parcel, eCommerce logistics, and property businesses in Singapore and internationally.

• The company's SGD 30 million investment to expand small parcel processing capacity by 4x, and reposition itself as a regional e-commerce logistics hub, is aligned with the continued surge in e-commerce in Southeast Asia-this has potential to accelerate parcel volume growth and revenue from new regional clients.
  
• Reintegrating international cross-border logistics into the core Singapore operations, streamlining management, and unlocking operational synergies should boost cost efficiencies and improve net margins, particularly as higher-cost, unprofitable routes are deemphasized in favor of leveraging Singapore's hub advantages.
  
• The ongoing digital and process automation initiatives-focused on customer platform upgrades and consolidation of logistics operations-are expected to enhance service reliability and customer retention, supporting sustainable revenue growth and margin expansion.
  
• Strong cash position post-Australian divestment (SGD 700 million cash, almost debt-free) gives SingPost significant flexibility for transformative investments, further property asset monetization, or shareholder returns, with positive implications for ROE and EPS if capital is effectively deployed.
  
• Urbanization and rising incomes across the Asia-Pacific, alongside last-mile and premium logistics demand, create structural tailwinds to grow revenue per parcel and expand into higher-margin services, directly benefiting long-term top-line and earnings potential.

Singapore Post Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Singapore Post's revenue will decrease by 0.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 27.0% today to 3.7% in 3 years time.
• Analysts expect earnings to reach SGD 29.4 million (and earnings per share of SGD 0.01) by about August 2028, down from SGD 219.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SGD41 million in earnings, and the most bearish expecting SGD17.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 65.5x on those 2028 earnings, up from 5.1x today. This future PE is greater than the current PE for the SG Logistics industry at 9.9x.
• Analysts expect the number of shares outstanding to grow by 0.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.88%, as per the Simply Wall St company report.

Singapore Post Future Earnings Per Share Growth

Risks

• The divestment of the Australian business, which accounted for over 50% of group revenue, significantly reduces SingPost's scale and diversification, exposing its future revenue and net margins to higher volatility and dependence on fewer segments.
  
• The International cross-border logistics business, previously a key growth area, is experiencing persistent losses due to intense competition, cost volatility, and geopolitical risks, raising concerns over long-term earnings and the viability of this revenue stream.
  
• The core Singapore postal network remains structurally loss-making, with continued declines in delivery volumes and no concrete resolution on a profitable model with the government, which could further depress net profits and operating margins if not addressed.
  
• Prolonged uncertainty around the company's strategic reset, including management and Board transitions, inhibits clear direction on growth initiatives or efficient use of excess cash, potentially suppressing return on equity and long-term shareholder value.
  
• Increased fixed costs, challenges in reducing the high-cost base quickly (especially in the legacy postal network), and the lack of material progress in digital transformation heighten the risk of eroding operational efficiency and future earnings in a rapidly evolving industry.

Valuation

• The analysts have a consensus price target of SGD0.7 for Singapore Post based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SGD793.6 million, earnings will come to SGD29.4 million, and it would be trading on a PE ratio of 65.5x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of SGD0.5, the analyst price target of SGD0.7 is 28.6% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.