SingPost could sell loss-making US e-commerce arm: analysts

In February, it saw an impairment risk to the book value of its US unit.

Analysts think Singapore Post could shut down or sell its loss-making US e-commerce business after conducting a strategic review on the unit, a Bloomberg survey revealed.

A potential divestment or shuttering of the business will bode well for SingPost’s long-term profitability, according to four analysts covering the stock. Two brokers including CLSA Ltd. have factored in benefits from a possible transaction in their earnings estimates.

The poll was conducted after SingPost said last month it saw an impairment risk to the book value of its US unit. The company is now conducting a review of the business which is “expected to remain loss-making in the current financial year," Mei Yu Hong, a company spokeswoman told Bloomberg by email on 20 February.

Also read: SingPost's turnaround may take three years as US losses widen

“I am expecting an exit from US e-commerce business either by scaling down or a sell-off," said CLSA analyst Horng Han Low, who upgraded the stock to buy from sell on 7 February with a target price of $1.17. “Sentiment has been overwhelmed due to the loss-making online business even as management reversed the structural decline in Post and Parcel segment," he said by phone.

The US e-commerce business, which helps US retailers including Speedo and Tommy Hilfiger manage online stores and package deliveries, has been a drag on SingPost’s profit as the unit suffered losses in each of the last three years, a key reason why SingPost’s market value has more than halved since a record high in February 2015.

Read the full report here.