SINGAPORE – Through a multi-pronged strategy, SingPost will attempt to transform itself fully into a logistics company within three years, group chief executive Vincent Phang said during a review of the business on March 19.

The move, which comes after an eight-month-long review, could involve selling SingPost Centre in Paya Lebar, as well as a partial stake in its Australian business to improve shareholder returns. It will also see a change in the company’s dividend policy.

These plans fall under the group’s strategy of managing capital more efficiently.

This focus could see non-core assets – including the group’s SingPost Centre – divested and the sales proceeds used to pay down debt, invested in its faster growing businesses or returned to shareholders.

SingPost Centre was valued at $1.1 billion as at September 2023.

Another initiative is the reorganisation of its business lines into geographic segments consisting of Australia – which accounts for around 60 per cent of the group’s revenue and profits – along with both Singapore and the international operations.

Mr Phang said this will enable each business line to have greater autonomy and flexibility in pursuing growth opportunities and achieving better valuations.

When asked if there were plans to list its Australian unit, chief financial officer Vincent Yik was non-committal, saying: “It may be an option.”

Focusing on the Singapore operations, Mr Phang noted that the domestic postal delivery service, having stabilised, is no longer loss-making and is recovering.

In comparison, SingPost’s network of post offices – which is largely a retail business – remains in the red.

Mr Phang said the group will continue to work with regulators and optimise operations to make the post office business commercially viable.

The group intends to integrate the sorting aspect of both the postal and e-commerce logistics businesses to turn it into a single cost-effective network.

In contrast, the optimisation of the post office network could come in the form of further automation, be more digitally driven or through some alternative delivery method.

The Straits Times understands that in other countries, this could be in the form of a tie-up with established convenience store chains or, in other cases, the post offices themselves could expand into becoming convenience stores and privatised subsequently.

The moves follow conclusions drawn from the review that SingPost’s current share price does not appropriately reflect the intrinsic value of the company.

Chairman Simon Israel said in a statement: “This is particularly apparent considering the value of the SingPost Centre, the group’s Australian business and the group’s growth potential.”

He added: “Management’s execution of our strategy will unlock value for shareholders and deliver agility and sustainable long-term growth as an international logistics enterprise.”

As a result of the business restructuring, however, SingPost’s dividend policy was also changed.

The payout will be lowered to 30 to 50 per cent of its underlying net profit for the financial year 2024 to 2025, down from 60 to 80 per cent previously.

Mr Phang said that this reflected the group’s transition from a public utility into a logistics company, where the dividend payout is less than 50 per cent.

Commenting on SingPost’s payout policy, CGS International Equity Research’s analyst, Mr Ong Khang Chuen, said that the new dividend policy is more sustainable for the company, in view of its pivot towards growth.

He said that “while the current policy is lower than the previous one, it should give SingPost room to navigate the transformational needs of the business”.

On whether these initiatives will see an adjustment of the group’s share price closer towards its intrinsic value, Mr Ong said he believes that “a successful execution of its strategic plans will help boost the share price”.

However, he noted that “aside from the value-unlocking exercise, we would also like to see SingPost’s growth initiatives taking shape to improve the earnings profile of the company”.

Shares of SingPost closed at 40.5 cents on March 19, up 2.5 cents or about 6.6 per cent.

At those levels, SingPost’s market capitalisation stood at $911.2 million, well below the value based on the sum-of-the-parts approach.

The sum-of-the-parts valuation is also known as the break-up value as it assesses what individual segments would be worth if the company was broken up.