How SingPost will survive the downward trend of e-commerce volume

UOBKayHian said the trend will improve in the medium term.

Headwinds for SingPost will continue as e-commerce volume declines post 2020 but UOBKayHian said the numbers will improve in the medium term.

It also said the domestic post & parcel’s operating loss will be around $15m.

However, the broker said in its report that SingPost will still discuss with the government to raise its postage rates, which will mitigate its operating losses. 

SingPost is expected to be saved by its international post & parcel business. Its IPP segments and Australian segment led to its stronger operating profit, which grew 11.8% year-on-year in Q1 FY 2024.

Its IPP segment growth was anchored by the China reopening but UOBKayHian reckoned that IPP hit a bottom, with 1QFY24 turning profitable as compared to 1QFY23. 

“This was driven by lower conveyance costs (-37.0% yoy), better cost control and a favourable higher-margin revenue mix, offset by a weaker Chinese renminbi. It was also noted that higher volumes from the higher-margin commercial solutions business helped stabilise cross-border e-commerce volumes,” it added.