The very public firing of three top Singapore Post (SingPost) executives was a dramatic episode in what has been a rather jejune year for the Singapore market.
Former group CEO Vincent Phang, group CFO Vincent Yik, and Li Yu, head of the group’s international business unit (IBU), were given a nasty early Christmas gift on Dec 22, 2024, when the company announced they were axed over the “grossly negligent” manner in which they had handled a whistleblower report and subsequent probes.
The whistleblower report claims SingPost’s IBU made manual entries of certain delivery status codes, which resulted in compensation for the customer involved. In the subsequent weeks, there was a series of to-and-fros between SingPost’s board and Phang and Yik, who have indicated their determination to contest the firing and welcome external inquiries on this episode.
However, analysts say investors ought to “ignore the noise” and look forward to special payouts from the divestment of its Australian business, Freight Management Holdings (FMH), and the potential divestment of Famous Holdings. SingPost acquired these assets over the years to build an external wing to compensate for the structural decline in its domestic postal business.
To recap, SingPost will sell FMH to private equity firm Pacific Equity Partners for an enterprise value of A$1.02 billion ($638.21 million), receive A$776 million in cash and post an expected one-off gain on disposal of around $312 million upon completion.
Around half of the A$776 million cash proceeds would be used to repay its expensive Australian dollar-denominated debt of A$362 million. After accounting for future funding needs, SingPost said that a special dividend would be considered in due course.
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UOB Kay Hian’s Llelleythan Tan Yi Rong estimates if the remaining proceeds of A$362 million are paid out, that means around 16 cents per share, which gives a yield of 27%. However, given how SingPost may prioritise the need to fund future growth opportunities, Tan says a more realistic estimate is $100 million, which would result in 4.4 cents per share, translating into a dividend yield of around 8%.
Tan expects SingPost to continue its monetisation of non-core assets and businesses in the foreseeable future. “We also understand that M&As and divestments are board-driven and that the recent change would not alter the group’s strategy to divest non-core assets.”
With former CEO Phang resigning from SingPost’s board on Jan 13, the EGM that has to be called for shareholders to give their nod for the divestment of FMH — expected in February — will probably go ahead without significant hiccups, given the fireworks between Phang and the board led by chairman Simon Israel.
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Another key asset to be divested is SingPost Centre. With interest rates no longer as high, some REITs have developed a bigger appetite for acquisitions. The mall space of SingPost Centre is now managed by CapitaLand, and CapitaLand Integrated Commercial Trust is long believed by market watchers to be the buyer.
Jarick Seet of Maybank Securities estimates that if the various key divestments go ahead, SingPost shareholders can potentially receive 86 cents per share in dividends from the proceeds in the coming couple of years.
In return for its long-held monopoly postal license here, SingPost has committed to certain levels of service standards, such as delivery deadlines. Given the declining volume but not a corresponding drop in overheads, SingPost, as part of its talks with the regulator Infocomm Media Development Authority (IMDA), could ask for variances in these requirements, and thus function with a lower unit cost.
If so, this will give SingPost some breathing room as it focuses on building a new and sustainable business.
All eyes now turn to who will be the next key faces of the national postal service provider and whether they can carry out management’s vision of “unlocking value for shareholders and delivering agility and sustainable long-term growth as an international logistics enterprise".
