Company Analysis:

Presented by: Ng Wen YingWang Si Jie (Jessie)Wu ShanCao Ya Jie

Singapore Post Limited

ABOUT•Commonly abbreviated as SingPost•Associate company of Singapore Telecommunications Limited•Singapore’s designated Public Postal Licensee•Provides 1) Mail 2) Logistic 3) Retail services

An Introduction and Analysis Approach

APPROACH1: Economic analysis for Postal industry2: Postal industrial analysis 3: SingPost Business analysis4: SingPost Financial analysis

Economic AnalysisMacroeconomic Environment and its implications

Indicators Trends ImplicationsGDP per Capita

•Risen 20% over the last 5 years

Economy is growing and is generally healthy macro environment factors unlikely to have adverse effects on company’s financial health

Inflation %

•Stable and within the range of 2% - 3%

Tamed inflation level operation cost wouldn’t be expected to surge if all else is kept constant.

Economic AnalysisMacroeconomic Environment and its implications

Indicators Trends ImplicationsInterest Rate

•Currently 0.17% and on a upwards rising trend

Rising interest rates and the impending high interest rate environment cost of capital might increase

Labour Cost

•Labour cost has rise moderately in past 5 years

Rising labour cost implies that businesses like SingPost that are labour intensive will be expecting higher labour cost higher operating expenses

Economic AnalysisMacroeconomic Environment and its implications

Indicators Trends ImplicationsPopulation

•Increased from around 4 million to 5.4 million

Growing population=Bigger market & demandBetter businessORMore delivery points and collection pointsHigher operating cost

Housing Stock

•Total housing stock increased from 700k to 1.2mil

Increasing number of housing stock Increasing number of delivery points higher operating cost

Economic AnalysisTrends in the Postal Economy – GLOBAL PERFORMANCE

Source: UPU Postal Statistics

- Total traffic: 368.4 billion- 2011 declined 3.7%

Letter Business

- Total traffic: 6401 million- 2011 rose 2.1%

Parcel Business

Global Postal Consumption vs GDP growth

Economic AnalysisTrends in the Postal Economy – REGIONAL PERFORMANCE

No. of LETTER posted/capita 2012

Source: UPU, Bern, Oct 2013

LETTER - Traffic Performance

No. of PARCEL posted/capita 2012

PARCEL - Traffic Performance

Economic AnalysisConclusion on Postal Economy

Sources of Financial income for Postal Operators 2011

• Letter-post volume has been on the decline bringing global postal consumption down despite a growing GDP

• Letter-post only contributes 20% of total income for operators• Postal network is increasingly used to transport goods (parcels)• We expect postal operators to make changes to their business model by taping on

their network and the development in e-commerce to remain competitive • It is also worth noting that the Asia Pacific region has been the least affected by the

decline in letter business and is also one of the better performer in parcel business

Industrial Analysis Porter’s 5 forces model

Industrial AnalysisSingPost Business Overview

SingPost has three main business areas:

1. Mail Business2. Logistics Business3. Retail and e-Commerce Business

SingPost monopolizes the mail business in Singapore (only Public Postal Licensee)

Revenue By Business

Industrial Analysis

The below analysis (+ / -) will be done from the Industry Player’s point of view:

Suppliers’ Power and Buyers’ Power

Suppliers’ Power (-)

- Large number of suppliers (+)- Low Switching cost for suppliers (-)- Limited choices in different suppliers (-)- Low supplier service differentiation (+) [differs only in destination & duration &

capacity]- Suppliers have high impact on cost (-) [traffic cost of postal industry is high]

e.g. Freight service providers

Buyers’ Power (+)e.g. Users of Postal services (Online shop owners etc.)

- Large volume of buyers (+)- Little substitute services available (+) [service differentiation low]- Low switching cost (-) [no binding obligation]- High buyer information availability (-) [transparent fee structure]- Low price sensitivity (+) [price inelastic, rigid demand]

Industrial Analysis

The below analysis (+ / -) will be done from the Industry Player’s point of view:

New Entrants and Substitute products

New Entrants (+++)- High capital requirements (+)- Economies of scale in the industry (+)- Extensive delivery network (+)- License needed for mail postage business (+)- Low technology protection (-)

Substitute Products (+)- Few substitute service (+)- New IT (email)- Change in supply chain structure (less reliance on logistics)- Insourcing (in-house logistics)

Industrial AnalysisCompetitive rivalry

The below analysis (+ / -) will be done from the Industry Player’s point of view:

Competitive Rivalry (-)- Relatively large numbers of competitors (-) [7000 logistics companies in Spore 2010]- Low switching costs between firms- Monopoly in mail postage (+)- Distribution of market share (DHL, FedEx, TNT, UPS, SingPost)- High exit cost (-)

Business AnalysisObjective: Visions, Value

Vision•To be a regional leader in e-commerce logistics and trusted communications

Values•A SingPost culture that embodies the 5Ts - Trust, Total Customer, One Team, Top Execution and Transformation.

Objective

Business AnalysisHistory Development

Historical Timeline• In 1819, foundation of SingPost in Singapore by Sir Stamford Raffles.• In October 1858, became a separate department from the Marine Office.• In 1949, linked with the Postal Department of the Federation of Malaya under a Malayan Postal Union

Agreement.• On 8 January 1966, admitted to the Universal Postal Union.• 1 January 1967, became a fully autonomous body.• In 1982, merged with the then Telecommunication Authority of Singapore.• In 1992, became the first Public Postal Licensee, and a subsidiary of Singapore Telecommunications.• On 13 May 2003, listed on the mainboard of the Singapore Exchange.

• Earned the honour of being the only company to have won the EMS Cooperative Certification Award by the Universal Postal Union (UPU) for our Speedpost Worldwide Service every year since 2001.

Awards

Business AnalysisRecent Acquisitions

Business AnalysisBusiness Segments

SingPost provides an integrated suite of mail, logistics and retail solutions in Singapore and the Asia Pacific region. It has three main business areas: Mail Business, Logistics Business, Retail Business.

Business AnalysisRevenue Breakdown

Business AnalysisStrategic Direction: To diversify its Postal business throughout the 5 pillarsthrough…

Mail: continue to deliver quality services & improve efficiency•Invest $100m in letter mail service enhancement.(sorting machinery, eg. mechanised rate increase from 85% to 95%; 3 wheels fleet, increase 25% mail carrying capacity for higher productivity ) Retail & Financial: Enhance customers experience to cater for growing trend in online shopping•More touchpoints (eg. new post office & automated services)•Mobile app•More services(Saturday delivery, 24/7 call center) Logistics: focus on development international e-commerce, logistic platform•Scale up investment in logistic infrastructure•Strategic acquisition to strengthen end to end ecommerce logistic value chain (Alibaba. F.S Mackenzie)•Focus on customer services operation excellence (innovation on self-help web booking tool, eg. ezy2ship)

Strategy

Business Analysis

• Domestic mail volume expected to remain on downtrend with operating cost rising

• Continued growth on e-commerce in Asia Pacific is expected leading to growing parcel volume

• Total development expenses will continue to rise as SingPost invest in developing e-commerce related capacities

• Non-postal business and revenue from both domestic and regional market is expected to continue growing for SingPost

Outlook

Business Analysis

Mail Business•Monopoly in SingaporeLogistics Business•DHL, FedExpress, TNT ,UPSRetail & Financial Services e-Commerce•eBay, Taobao, Amazon

Competitors

Business AnalysisStructure

Strategic Alliances Subsidiaries• Datapost• Quantium Solution• Famous Holdings• Lock+ Store• Novation• Samplestore.com• SP eCommerce

• 4px World Express Co. Limited• 7-Eleven,Inc. (Food Retail)• Co-operative Bank Ltd.• DBS bank Ltd. (Diversified Banks)• eBay Inc. (Internet Software and Services)• HDFC Bank Ltd. (Diversified Banks)• Japan Post Holdings Co, Ltd. (Air Freight and Logistics)• Lucasfilm Ltd.LLC (Movies and Entertainment)• Marvel World,Inc• MasterCard Incorporated. (Data Processing and

Outsourced Services)• New Zealand Post Limiter (Air Freight and Logistics)• PayPal,Inc. (Data Processing and Outsourced Services)• Prudential Singapore Holding Pte. Limited• Standard Chartered Bank Singapore. (Diversified Banks)• Standard Chartered PLC. (Diversified Banks)• State Bank of India. (Diversified Banks)• Tun Foundation Bank• United States Postal Service. (Air Freight and Logistics)

Financial AnalysisHorizontal Analysis for Income Statement

Financial AnalysisHorizontal Analysis for Income Statement

Reasons for decrease in profit

• industry challenges• weaker business

environment• increased cost pressures

(labor and rent)• investment in its operating

capabilities, people, IT and operations.

Financial AnalysisHorizontal Analysis for Cash Flow Statement

• Steady increase in operating cash flow• Increase in cash outflow in financing activities was mainly due to the repayments of

the S$300 million bond and S$15.5 million

Financial AnalysisVertical Analysis fir Balance Sheet

Financial AnalysisDividend Policy

Dividend Policy

• Singapore Post has a stable dividend policy of paying fixed dividend per share for past 7 years.

• Barring unforeseen circumstances, the Group will endeavor to pay a minimum annual dividend of 5 cents per share.

Financial AnalysisRatio Analysis

The End

Presented by: Ng Wen YingWang Si Jie (Jessie)Wu ShanCao Ya Jie