Should SingPost divest its headquarters building?

Business Times

21-05-2025

[SINGAPORE] The share price of Singapore Post (SingPost) said it all about investors' attitude towards the national postal service provider's latest set of financial results.
The share price tanked 12 per cent on May 15 despite SingPost proposing a dividend of S$0.09 a share for FY2025 ended March, with the payout from the gain from disposal of its Australian logistics business.
But shareholders' focus were not only on the special payout, the net loss of S$461,000 for SingPost's second half of the year was clearly not lost on them.
The net loss could be said to be insignificant at first glance, but it is in fact a reversal from earnings of S$28.1 million for the year-ago period.
SingPost attributed the dismal performance to intensifying challenges and uncertain conditions in the global logistics sector.
Revenue decreased 12.1 per cent to S$387.5 million for the half-year, with all segments recording declines. But sub-segments property and freight forwarding both delivered improvements of 10.7 per cent and 15.8 per cent, respectively.
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Both domestic and international postal and logistics businesses posted lower revenue, with the international business declining 39.2 per cent year on year and local, 9.6 per cent.
Similarly, SingPost's property and freight forwarding sub-segments were the better-performing ones in terms of operating profit, delivering an improvement of 17.8 per cent and 31 per cent, respectively.
Its local postal and logistics business' operating profit was down 55 per cent to S$7.4 million, while international business went deeper into the red at S$5.3 million from S$0.6 million in operating loss.
This underscores the continued secular decline of the domestic postal and logistics business, and the highly competitive international postal and logistics market that SingPost is in.
Unsurprisingly, SingPost commented that its domestic postal and logistics business saw lower profit from its delivery business and losses in other services, while the post office network remained unprofitable.
SingPost is streamlining its operations to reduce its cost base, including reintegrating its international cross-border business into the Singapore business, to achieve synergies and efficiencies.
It will also reset its strategy of its Australian logistics business post-sale.
Still, given the smallish Singapore market and the competitive cross-border business, as well as the secular decline of the postal business, there is arguably a limit to what SingPost can achieve in terms of top line and bottom line.
Meanwhile, SingPost's divestment of non-core assets, including its headquarters building SingPost Centre, remains on the cards.
Non-core assets might not be central to or key pillars of a firm's main businesses, but they do have their usefulness and a place in the portfolio at times, as seen in SingPost's latest financial results.
Its property segment raked in full-year operating profit of S$48.4 million – more than any other segment, and higher than the total group operating profit of S$44.3 million after accounting for operating losses in some segments.
SingPost Centre, for example, recorded increased rental income amid a higher overall occupancy rate of 98.2 per cent as at Mar 31, compared to 96.2 per cent as at end-FY2024. The retail mall was fully occupied compared to 99.6 per cent previously, while the office space occupancy rate rose to 97.6 per cent from 94.8 per cent.
SingPost's directors' bid to unlock value for shareholders – through various means such as selling non-core assets – is commendable. But it would likely be saddled with non-remarkable domestic and international postal and logistics businesses before its reset strategy becomes fruitful.
Surely, SingPost would like to have a stable and supportive base of shareholders, not the opportunistic who swoop on the stock on news of potential disposal gains and dump it after reaping the capital gain.
The group on Wednesday (May 21) announced chairman-designate Teo Swee Lian will helm the board from the next annual general meeting, and appointed several new directors recently. The board and shareholders might want to reconsider selling SingPost Centre, at least not before its reset strategy bears fruit.