Since collapsing to a 10-year low in December 2018, SingPost share price managed to crawl its way back to the $1.00 mark. But it seems that the recovery of SingPost share price could be a false dawn in the making as the management dropped a big hint in its recent financial report that a massive impairment to the carrying value of the US businesses is on the way.
For SingPost, impairments are assessed based on the full financial year results. The last time that SingPost recorded significant impairments was in FY2017 which saw SingPost suffered impairment charges of a massive $208.6million for TradeGlobal. The huge impairment charges walloped SingPost share price upside down back then. Thus, SingPost share price could be poised for another challenging time.
The recent revival in SingPost share price should be attributed to the management’s aggressive share buy-backs. As at 21 March 2019, 13.8 million shares were purchased from open market. The share buy-backs provided critical support for SingPost share price, which would have suffered a worse fate given recent spate of toxic news on SingPost.
Taking into consideration the coming “tsunami” and the aggressive share buy-backs, investors of SingPost should brace for a roller-coaster ride and expect plenty of volatility of SingPost share price in the coming months. Nonetheless, investors should not panic over the swings in SingPost share price because SingPost has a solid balance sheet and strong operating cash flow. The business fundamentals are still sound and it is certainly not all “doom and gloom” for SingPost share price. The key to staying calm is to adopt a long-term view for this counter.
Nightmare form of SingPost share price
Obviously, long-time investor of SingPost must be wondering if SingPost share price can ever see light at the end of tunnel. The past four years had been an absolute nightmare as SingPost share price got bombed out by unfolding events that threatened to derail the growth of the venerable institution. In January 2015, the shares were trading at a sky-high of $2.14. Fast forward four years, SingPost share price had declined more than 50% in value while dividend policy was changed from an absolute amount to a ratio pay-out between 60 percent to 80 percent of the underlying net profit for each financial year.
The appointment of CEO Mr Paul William Coutts in 2017 helped to restore stability, but it is still premature to judge his performance because there is a need to give him at least one more year to produce reasonable results. In the interim, expect plenty of volatility for SingPost share price as the company navigates through choppy waters.
On 7 February 2019, SingPost was fined a record $100,000 by IMDA for failing to meet Quality of Service standards in 2017. As a result, SingPost made a commitment to improve its mail operations. Among the immediate measures included hiring 100 more postmen and increasing staff salaries. It seems that Paul Coutts had his work cut out for him as he not only have to grapple with souring business performances, but also operational issues. Given the state of affair, it is no wonder SingPost share price got walloped in recent years.
To put things into perspective, investors must be [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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