Nowadays, it is not surprising that many of the blue chips in Singapore Exchange suffer from poor stock performance because of the global headwinds and challenging operating environment. But this is certainly not the case for SingPost share price, which plunged after the announcement of 40% decline in net profit for Q1FY18/19.
Upon the release of the financial result in August 2018, investors sent SingPost share price reeling from $1.38 to as low as $1.03. Till now, SingPost share price has not recovered its form and is on course to retreat below the $1.00 mark. Should investors run for their lives?
Before writing this counter off, it should be noted that Alibaba’s Jack Ma is a major shareholder of SingPost, with stake amounting to 14.5%.
Question now is: will Jack Ma buy over SingTel’s stake of 21% in SingPost? Given that Alibaba’s stakes were bought in two tranches – 2014 and 2017 – at SingPost share price of about $1.40, the current valuation seems attractive for a surprise buyout. In life, never say never. Just look at M1 buyout offer by Keppel and SPH a couple of weeks ago.
Those who enter at current SingPost share price should be betting on potential Alibaba’s acquisition but a lot actually hinges on whether SingTel wants to unlock value through the divestment of stake in SingPost.
In 2017, SingTel had divested its stake in NetLink Trust and unlocked billion of cash. In this article, I will share my insights on why current SingPost share price may be a potential target for acquisition based on its book value and operating cash flow. And SingTel’s 735 million mobile customers may be key in unravelling the mystery of Alibaba’s investment in SingPost.
Falling knife of SingPost share price?
The reason given for the recent poor financial results was “an exceptional fair value loss on warrants from an associated company, reflecting changes in the market value of the financial instrument”. Investors would have a feeling of déjà vu as they recall the poor investment judgement of SingPost on TradeGlobal that incurred an impairment loss of $185 million two years ago. That misstep almost led to an annual loss for FY2017.
Why would Singapore postal service provider be involved in financial instrument is beyond my understanding. The transformation journey to branch into logistic, eCommerce and property to offset the decline in postal revenue is understandable. But why would SingPost be dabbling with financial instruments? And is it really true that the exceptional loss on warrants was the culprit for the fall in net profit?
Based on financial data, another key factor for the lower profit was [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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