Alibaba and the shopping list: Here's what SingPost can buy using Alibaba funds

Other ASEAN hubs are targeted.

News recently erupted that The Postman will pocket heaps of cash from Alibaba as the latter eyes injecting $312.5m in SingPost. With money as hefty as this, choosing how to spend it could be a daunting task, but SingPost has its shopping list ready and is all set to stick to it.

According to CIMB, Alibaba plans to invest S$312.5m in SingPost for the purchase of 30m existing treasury shares and 190m new ordinary shares at S$1.42/share. 

Here's more from CIMB:

This gives Alibaba a 10.35% stake in SingPost, making it the second largest shareholder behind SingTel. The two parties also signed an MOU to negotiate a potential JV that will create a platform for international e-commerce logistics. 

The S$312.5m proceeds, net of S$4.5m expenses, will be allocated as follows:

1) 33% (S$102m) for investments, M&As and upgrading of IT systems in the e-commerce logistics segment 

2) 33% (S$102m) for other M&A opportunities, to build new logistics warehouses and upgrade existing warehouses

3) 34% (S$105m) for working capital needs 

This gives SingPost up to an extra S$203m in cash, on top of its existing S$170m in net cash to pursue M&A opportunities and other capex plans.

With these new funds, SingPost can expand more aggressively across the region to accommodate the higher demand for its e-commerce logistics services as e-commerce activity picks up.

The funds from Alibaba also provide SingPost with ammunition to pursue larger-scale acquisitions that were not possible in the past.

This leaves room for further earnings upside from M&As. 

What will it buy? Besides Singapore, SingPost currently has last-mile delivery capabilities in Malaysia (via GD Express), Vietnam (via ITL) and Indonesia (via its subsidiary, Quantium Solutions, which recently set up a JV there). However, SingPost does not have its own last mile delivery network in other ASEAN countries, but instead relies on local postal service providers.

Acquiring a stake in low-cost couriers in other ASEAN countries will expand its network and allow it to truly become the leading e-Commerce logistics player in the region.