Open sesame: Why is Alibaba’s magic still not working on SingPost?

Business flow is slower than expected.

Singpost's proposed joint venture with e-commerce giant Alibaba has not yet delivered solid results.

The collaboration was met with great fanfare when it was first revealed in May last year, raising hopes for a double-digit improvement in SingPost's FY16 bottomline.

However, DBS analyst Sachin Mittal noted that Alibaba business has been slower than expected, as both parties are still ironing out some regulatory details.

“Business flow from the Alibaba partnership has been slower than our expectations. Singapore and Indonesia will act as pilot markets and volumes are likely to improve in the medium term. However, further plans are still under negotiation. Therefore, we may not see a double digit improvement in the FY16F’s bottomline as previously expected,” Mittal noted.

Mittal expects the postal rate hike and acquisitions to drive bulk of the near-term profit improvement.

“We expect the postal rate hike to contribute S$5m to the increase in earnings in FY16F while CP Group acquisition in Dec 2014 should provide an additional S$8m improvement in the bottomline,” the report said.