SINGAPORE (July 2): Vincent Phang, the new chief executive officer of postal services at Singapore Post (SingPost), is facing an uphill battle to regain public confidence after a series of service lapses, which has contributed to its shares sliding some 31% off its 52-peak of $1.39.
SingPost has been fined a total of $400,000 by the authorities for failing to meet delivery standards in 2017 and 2018. This includes incidents of postmen caught dumping mail instead of delivering it.
But Phang, 45, who took up the role with effect from April 1 this year, will be eager to regain public trust.
Already, SingPost has introduced a number of measures, such as hiring more delivery staff and will trial extending doorstep deliveries for parcels to the evenings to increase the chance that the recipient will be at home to collect the package.
It also plans to streamline its delivery operations to ease the workload of postmen and optimise delivery routes.
Pending regulatory approval, SingPost also hopes to replace letterbox masterdoors with slam-shut versions, which would lessen security risks due to masterdoors being left open unintentionally.
“Operational changes remain very much in focus as fixed costs are gradually built in and remain a near-term drag,” says UOB Kay Hian analyst Lucas Teng in a note on Tuesday.
“With costs already in place, it will take some time before efficiency in deliveries enables volume growth to take effect, especially with some of the service trials commencing in the latter half of the year,” he adds.
Meanwhile, Teng believes the sale of SingPost’s US e-commerce business could offer some much needed reprieve.
“The e-commerce segment had an operating loss of $52 million in FY19,” he says. “We think the sale could take place within six to nine months’ time and note SingPost may have the option of disposing the business without value.”
SingPost’s dream to transform into an e-commerce play in the US came to an end when Amazon.com turned up at its door – literally.
Amazon in May held a groundbreaking ceremony for its US$1.5 billion ($2.05 billion) logistics superhub in Cincinnati, which is less than an hour’s drive from SingPost’s e-commerce and logistics subsidiary, TradeGlobal.
SingPost had said earlier this year that it would sell TradeGlobal and US e-commerce software and services provider Jagged Peak amid margin pressures from decreasing mail volume.
The postal company bought majority stakes in the two e-commerce businesses for US$184 million in 2015.
For FY19 ended March, SingPost recorded total impairment charges of $98.7 million for the two subsidiaries.
See: SingPost's yield seen stable even as company bolsters Singapore operations
UOB is keeping its “hold” call on SingPost with a slightly lower target price of $1.04, down 2 cents from $1.06 previously.
“SingPost looks to be hampered by transformation costs in the near term,” Teng says, adding that the group’s parcel delivery and logistics segments are expected to continue to face competitive pressures.
However, the analyst is optimistic that the group’s new postal services CEO and Singapore head can tap on his wealth of logistics and operations experience to help SingPost overcome its challenges.
“Mr Phang was previously ST Logistics’ Group CEO and held various senior leadership positions in the supply chain and logistics industry in Asia,” Teng says.
As at 4.30pm, shares in SingPost are trading 1.0% down at 95.5 cents, implying an estimated price-to-earnings (PE) ratio of 23.9 times and a dividend yield of 4.1% for FY20F.
