June 13, 2016 Singapore Post Ltd SELL (SPOST SP) Pain Before Gain Share Price SGD 1.57 12m Price Target SGD 1.29 (-18%) Transformation far from over Company Description SingPost started its M&As in 2011 to evolve from a domestic-mail SingPost is a national postal provider that has branched into global e-commerce and fulfilment monopoly into an international e-commerce logistics provider. Although it logistics services. now provides various e-commerce logistics services in the Asia Pacific, most of its acquisitions have not added much to synergies or earnings. A pending second investment by Alibaba may also be under threat, while Statistics recent newsflow on corporate governance appears not over. Initiate with 52w high/low (SGD) 1.96/1.30 SELL and a DCF-based TP of SGD1.29 (WACC 11.3%, LTG 1.0 %). Near term, 3m avg turnover (USDm) 7.4 we expect SingPost’s dominant cash-cow mail business to provide support. Free float (%) 75.3 s la Not yet formidable e-commerce player Issued shares (m) 2,162 i rt We foresee a long gestation period for SingPost’s M&As, as: 1) its acquired Market capitalisation SGD3.4B su businesses are small players in their fields facing intense competition; 2) USD2.5B d they have only diversified and bumped up its revenue but not yet added Major shareholders: n I much to earnings; and 3) more investments would be needed for its Singapore Telecommunications Ltd. 22.9% Alibaba Investment Ltd 10.2% customer acquisitions and scale economies, in our reckoning. na na At risk: Alibaba’s second investment Price Performance Alibaba’s second investment in SingPost is taking much longer than its first 2.20 140 in 2014. Its long-stop date has been extended three times. SingPost 2.10 135 e attributed the delays to slow regulatory approval. We see risks of the deal 2.00 130 r o falling apart, as Alibaba might choose to expand its ASEAN logistics 1.90 125 p a capability in-house using Lazada’s own logistics network. 1.80 120 g 1.70 115 n Corporate-governance overhang i 1.60 110 S Investors’ confidence in SingPost has been dented since its CEO’s abrupt 1.50 105 resignation in Dec 2015, followed by revelations that one of its directors 1.40 100 had omitted the disclosure of his interest in a previous acquisition. Since 1.30 95 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 then, its chairman and two directors have agreed to step down. While a new chairman has been appointed, SingPost is still searching for a new Singapore Post - (LHS, SGD) Singapore Post / Straits Times Index - (RHS, %) CEO. We think the air may not clear in the near term, as: 1) results of a -1M -3M -12M corporate-governance review by Heidrick & Struggles will be due in Jul Absolute (%) (1) (2) (16) 2016; and 2) there could be more investigations into breaches of the Relative to index (%) (4) (2) (1) Companies Act by ACRA since it started investigating in May 2016. Source: FactSet Peak valuations; SELL We believe investors are too optimistic and have not priced in the potential for further negative newsflow. The street’s 14% YoY EPS growth could also fall short from a loss of rental income and TradeGlobal’s drag. SingPost is trading near its peak valuation and at 1SD above its 10-year mean of 22x FY17E P/E. Initiate with SELL with our DCF TP implying 18x FY3/17E EPS, a 6% premium to its 10-year forward P/E mean. FYE Mar (SGD m) FY15A FY16A FY17E FY18E FY19E Profits have not grown since FY11, could stay flat in FY17E Revenue 920 1,152 1,349 1,494 1,661 (SGD m) Revenue Core earnings EBITDA 225 320 235 258 288 Organic Core net profit 157 154 154 173 198 1,800 Core EPS (cts) 7.1 7.1 7.2 8.1 9.2 1,600 Inorganic Core EPS growth (%) (6.6) 0.0 0.3 12.5 14.4 1,400 Net DPS (cts) 7.0 7.0 7.0 7.0 7.0 1,200 Commercialisation Building the base Core P/E (x) 22.0 22.0 21.9 19.5 17.0 1,000 P/BV (x) 2.3 2.2 2.2 2.2 2.1 800 Net dividend yield (%) 4.5 4.5 4.5 4.5 4.5 600 ROAE (%) 12.2 10.2 10.0 11.2 12.6 ROAA (%) 8.0 6.7 6.2 6.7 7.5 400 150 1 35 1 41 1 49 1 57 1 54 1 54 1 73 1 98 200 EV/EBITDA (x) 18.8 12.6 17.0 15.4 13.6 - Net debt/equity (%) net cash 9.9 15.7 14.0 10.1 Consensus net profit - - 177 204 196 MKE vs. Consensus (%) - - (12.8) (15.1) 1.1 Source: Company, Maybank KE John Cheong, CFA [email protected] (65) 6231 5845 SEE PAGE 44 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Co. Reg No: 198700034E MICA (P) : 099/03/2012 Singapore Post Ltd Value Proposition Price Drivers  National postal provider that has branched into global e- Historical share price commerce and fulfillment logistics, helping retail 2.20 220 customers to sell online faster and more efficiently. 2.00 4 200  Under transformation from a highly-cash-generative but 1.80 180 declining mail business to high-volume, high-growth e- 2 3 1.60 160 commerce logistics 1.40 140  Offers cheapest e-commerce deliveries at home. In ASEAN, 1 1.20 120 has tied up with other national postal providers to offer commercial delivery services. 1.00 100 1  After digesting all acquisitions, earliest notable results 0.80 80 May-11 May-12 May-13 May-14 May-15 should surface in FY3/18. Will rely on Alibaba’s volumes, a Singapore Post Ltd - (LHS, SGD) new logistics hub and new US customers for growth. Singapore Post Ltd / MSCI AC Asia ex JP - (RHS, %)  Recent ROEs about 9.9%. Expect expansion from FY3/18, from revenue growth and cost synergies. 8.3% FY16 ROIC Source: Company, Maybank Kim Eng vs 8.1% WACC. Transforming into an e-commerce logistics provider 1. Core mail volume declined in FY3/12, after growing 8% in FY11. 2. Re-rated in 2012-2014 after acquiring e-commerce logistics outfits which bumped up its revenue growth. 3. Mar 2014: China’s e-commerce juggernaut, Alibaba, took a 10% stake in SingPost and signed MOU for a JV in international e-commerce logistics. 4. Dec 2015 – Jan 2016: CEO resigned. Disclosure that director’s interest was not declared. Source: Company Financial Metrics Swing Factors Upside  Revenue CAGR of 12% in past five years, but flat profits due to ongoing digestion of M&As.  Expect profit growth only in FY18, on synergies from e-  Faster-than-expected turnaround of TradeGlobal, a commerce logistics and completion of mall refurbishment. newly-acquired e-commerce enabler for fashion and  Growing e-commerce volume may lower margins. lifestyle.  Major capex of SGD140m for FY17E for e-commerce retail  Higher-than-expected revenue growth in e-commerce mall & regional logistics hub. logistics, from more customers and services.  ROEs & FCF expected to grow, along with profits from  Higher-than-expected margins for e-commerce logistics, FY18E. DPS to be stable at 7 SGD cts. from economies of scale and operating leverage. Profits have not grown since FY11, could stay flat in FY17E (SGD m) Revenue Core earnings Downside Organic 1,800 1,600 Inorganic  Inability to resolve corporate-governance conundrum, 1,400 including board’s independence and disclosures. 1,200 Commercialisation  Failure to extract synergies and integrate its largest 1,000 Building the base acquisition, TradeGlobal. 800  Worse-than-expected deterioration in mail business 600 400 150 1 35 1 41 1 49 1 57 1 54 1 54 1 73 1 98 before e-commerce logistics compensates. 200 - Source: Company [email protected] June 13, 2016 2 Singapore Post Ltd Table of Contents 1. Investment Thesis .................................................................................................................... 4 2. Focus Charts .......................................................................................................................... 6 3. Corporate Information .............................................................................................................. 7 4. Long Way from Becoming Formidable in e-Commerce ........................................................................ 10 5. Alibaba’s Second Investment at Risk ............................................................................................. 14 6. Corporate-Governance Overhang: No End in Sight ............................................................................. 18 7. Potential kitchen-sinking of non-performing businesses by new CEO ....................................................... 20 8. Mail Business to Remain Cash Cow for Now ..................................................................................... 21 9. Forecasts & Assumptions ............................................................................................................ 24 10. Valuation & Recommendation...................................................................................................... 29 11. Risks .................................................................................................................................... 32 Appendix 1: Management Overview .................................................................................................... 33 Appendix 2: e-Commerce Outlook in Asia ............................................................................................. 35 Appendix 3: SingPost’s e-Commerce Initiatives ....................................................................................... 37 Adoption of new technologies ........................................................................................................... 40 June 13, 2016 3 Singapore Post Ltd 1. Investment Thesis Not yet formidable in e-commerce; more pain before gain SingPost started as Singapore's postal-service monopoly more than 150 years ago. As its mail volume started to decline under the encroachment of e-commerce, it began a series of M&As in 2011 to gain exposure to e- commerce logistics. Most of its acquisitions have yet to produce direct synergies. At most, they have diversified its revenue and allowed it to book higher overseas revenue. We foresee a long gestation period as its acquired businesses are small players in their fields and major investments would still be needed for customer acquisitions and scale economies, in our view. Meanwhile, we believe its new CEO might have to kitchen-sink non-performing businesses to begin on a clean slate. Risk of Alibaba’s investment falling through The long-stop date for Alibaba’s second investment in SingPost has been extended three times since its announcement in Jul 2015, now to Oct 2016. This is way longer than the two months Alibaba took to make its first investment in 2014. SingPost attributed this to Alibaba’s investment in Quantium Solutions and its recent acquisition of Lazada, which require further studies of potential collaboration. As Quantium is a non-listed subsidiary, it also said the regulators require more time to study Alibaba’s proposed investment. We are apprehensive about the prolonged delay, which we believe may be related to: 1) corporate-governance issues at SingPost; 2) Alibaba may consider expanding its logistics capability in-house using Lazada’s own logistics network and 3) terms which had been negotiated by its previous management and board members. Nagging corporate-governance overhang What started as a relatively innocuous piece of news in Dec 2015 upon the resignation of SingPost’s CEO snowballed into revelations about the non-disclosure of a director’s interest in a prior M&A transaction and the resignation of its chairman and two directors by May 2016. A day after his appointment as the new chairman, Professor Low Teck Seng, an independent director, turned down the position. In May 2016, Singapore’s Accounting and Corporate Regulatory Authority (ACRA) requested SingPost to furnish a joint special audit report, even as it commenced investigations into possible breaches of the Companies Act by SingPost. The results of a corporate-governance review by Heidrick & Struggles are due before an AGM in Jul 2016. We think the spate of negative newsflow will not abate in the near term. June 13, 2016 4 Singapore Post Ltd Look out for potential housekeeping Our ACRA checks indicate that the operating cash flows of several major Fig 1: Financials of subsidiaries (SGDm) subsidiaries such as Quantium Solutions and Couriers Please are not growing as quickly as the assumptions used by SingPost in its goodwill- Quantium Solutions Int FY14 FY15 Revenue 161.4 202.8 impairment estimation. We think the greatest risk to Quantium’s growth Net profit 6.1 1.5 is any cancellation of plans by Alibaba to turn Quantium into its JV with Operating cash flow 25.7 21.1 SingPost. In this scenario, new China delivery volumes may not come to Famous Holdings FY13 FY14 FY15 pass, potentially affecting SingPost’s growth assumptions for Quantium. Revenue 150.5 149.4 171.8 Total goodwill was worth around SGD550m as of Mar 2016. We think its Net profit 2.0 4.4 5.2 new CEO might opt to start on a clean slate by adopting more-prudent EBIT 3.7 6.5 7.6 goodwill-impairment assumptions or divesting non-core businesses. Source: ACRA Earnings could disappoint at peak valuations; initiate with SELL We expect FY3/17 core earnings to be flat, on the heels of a 2% decline in FY3/16. This would be due to a temporary loss of rental income from the renovation of SingPost’s headquarters over 3Q16–1Q18, losses from TradeGlobal and start-up costs for its new regional logistics hub from Sep 2016, potentially buffered by growing parcel volume from international e-commerce transactions. The street remains bullish, eyeing 14% YoY EPS growth. The street was wrong by a wide margin in FY16, with a forecast that was 10% higher than SingPost’s reported SGD154m. SingPost trades near its peak and is 1SD above its 10-year mean, at 22x FY17E P/E. We initiate coverage with a SELL and DCF TP of SGD1.29, implying 18x FY3/17E EPS, a 6% premium to its 10-year forward P/E mean. June 13, 2016 5 Singapore Post Ltd 2. Focus Charts Fig 2: Mail volume is under the onslaught of Internet Fig 3: Acquisitions so far have not translated into meaningful penetration in Singapore core earnings growth. 2017 could be another flat year (No. 'm) (%) Mail volume (LHS) Internet penetration (RHS) (SGD m) 790 82 160 157 780 80 155 154 154 770 * 78 150 148 150 149 760 76 145 141 750 74 140 135 740 72 135 730 70 130 720 68 125 710 66 120 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 2016 2017E * Internet penetration declined in 2014 due to changes in age-group coverage & reference periods Source: IDA Source: Company, Maybank KE Fig 4: More corporate-governance scandals might emerge Fig 5: Share-price rally from SGD1.30 was sparked by Alibaba’s first investment in SingPost in Mar 2014. But Date Key events 10 Dec 2015 CEO, Mr Wolfgang resigned. Alibaba is taking too long to complete its second investment, raising doubts about its completion 15 Dec 2015 Associate Professor Mak raised concerns about SingPost’s board and management. Date Announcements 22 Dec 2015 SingPost revealed that it did not disclose its director’s 28 May 2014 Alibaba will invest SGD313m for 10.3% of SingPost. Also interest in a previous acquisition in Jul 2014. signed MOU for JV in SingPost’s international e-commerce 19 Jan 2016 SingPost appointed PWC as its special auditor. This was logistics subsidiary, Quantium Solutions International questioned as PWC is SingPost’s external auditor. 31 Jul 2014 New shares & treasury shares of SingPost were transferred 31 Mar 2016 SingPost appointed Heidrick & Struggles to review its to Alibaba in just two months. corporate governance and board’s independence. 8 Jul 2015 Alibaba will raise stake in SingPost to 14.51% by investing 1 Apr 2016 Chairman Mr Lim resigned. Board member, Professor Low, SGD187m. Will invest SGD92m for 34% of Quantium. Long- was appointed as new chairman. stop date set at 30 Nov 2015, with automatic extension to 7 Apr 2016 Professor Low turned down his appointment. 31 Dec 2015. 29 Apr 2016 Press reported that SingPost’s special audit has been delayed 2 Nov 2015 Long-stop date extended to 29 Feb 2016. due to a dispute between directors and auditors. 10 Feb 2016 Long stop-date extended to 31 May 2016. 3 May 2016 Special audit concluded that SingPost’s director has breached his fiduciary duties and SingPost does not have an M&A policy. 12 Apr 2016 Alibaba buying a controlling stake in Lazada for USD1b, to 5 May 2016 A new chairman was appointed. break into the ASEAN market. It might reassess its JV with 12 May 2016 Independent director, Mr Keith Tay, resigned. SingPost, as Lazada operates its own logistics network. 12 May 2016 Long-stop date extended to 31 Oct 2016. 19 May 2016 ACRA launched an investigation into SingPost’s potential breach of Companies Act. 25 May 2016 Alibaba under investigation by US SEC, over accounting 25 May 2016 Deputy Chairman, Mr Goh, resigned. practices & possible violation of federal laws. Related to Up to Jul 2016 Possible negative findings on corporate governance by its consolidation policy, related-party transactions and Heidrick & Struggles and more investigations by authorities. operating data from Singles Day. Source: Company, Maybank KE Source: Companies, Maybank KE Fig 6: Potential kitchen-sinking of high goodwill by new CEO Fig 7: At 1SD above its long-term P/E mean, valuations are rich against its flat earnings & corporate-guidance risks (SGD m) ((xx)) 600 30 500 500 28 Impairment 26 of SGD15m 400 24 + 1SD = 22x 22x 297 22 300 20 180 167 18 Mean = 17x 200 16 100 78 14 -1SD = 12x 12 0 10 FY12 FY13 FY14 FY15 FY16E Source: Company, Maybank KE Source: Company, Maybank KE June 13, 2016 6 Singapore Post Ltd 3. Corporate Information 3.1 From mail to e-commerce logistics Listed in May 2003, SingPost has been Singapore’s postal-service provider for more than 150 years. Today, it operates in 15 countries and employs more than 7,000 people. Its mail monopoly has been eroded in recent years by declining volume of traditional mail. This has forced SingPost to diversify into e-commerce and logistics. Since 2011, it has acquired over 20 companies for SGD600m. While they have bumped up its revenue and lowered its reliance on traditional mail services, they have yet to make meaningful profit contributions due to ongoing expansion and integration costs. SingPost operates under three segments: 1. Mail. This refers to its plain-vanilla domestic and international mail- delivery business. 2. Logistics. Here, it operates e-commerce logistics, warehousing, fulfillment and distribution through Quantium Solutions and freight forwarding through Famous Holdings. 3. Retail & e-commerce. SingPost provides services that go beyond its traditional postal services, such as front-end ecommerce solutions, agency services and financial services. It operates through three major subsidiaries: SP e-commerce, TradeGlobal (acquired on Nov 2015 for SGD236m) and Jagged Peak (acquired on Mar 2016 for SGD22m). This is a unique segment absent from most logistics and delivery companies. It serves as SingPost’s first point of contact with its retail customers, which often require help in setting up web stores in a short time, scaling up in culturally diverse regions and/or outsourcing their e-commerce platforms. SingPost is able to take care of their website development & operations, online marketing, order management and customer care. Fig 8: Business by revenue… Fig 9: … and by operating profit Mail is steadily shrinking… … although still at 80% of operating profit (SGD m) (SGD m) Mail Logistics Retail e-commerce Mail Logistics Retail and e-commerce 1,400 200 98 1,200 62 180 27 1,000 18 65 626 160 69 465 800 67 67 69 8 -4 369 140 86% 87% 87% 82% 79% 600 - 241 120 84% 88% 198 215 400 174 440 491 500 500 100 360 386 385 200 80 - 60 2010 2011 2012 2013 2014 2015 2016 Logistics revenue 215 241 369 465 626 40 Quantium Solutions 137 159 154 203 297 20 Famous 58 58 128 168 229 - Others 20 36 87 94 100 2010 2011 2012 2013 2014 2015 2016 Source: Company, Maybank KE Source: Company, Maybank KE June 13, 2016 7 Singapore Post Ltd Fig 10: Change in road map Source: Company Fig 11: SingPost’s e-commerce revenue is captured under all its three businesses Segment Mail Logistics Retail & e-commerce Quantium Solutions SP e-commerce Domestic and (warehousing & fulfillment) (website design, returns) international e-commerce Famous Holdings vPost e-commerce revenue parcels under 2kg (freight forwarding) (overseas e-commerce) source Others Transshipments (courier for parcels of more Omigo (online marketplace) than 2kg) e-commerce revenue SGD165m (33%) SGD149m (24%) SGD98m (61%) (% of segment’s Total revenue: SGD500m Total revenue: SGD626m Total revenue: SGD161m revenue) Source: Company, Maybank KE Fig 12: Acquisitions since 2011 Annualised Date Stake Business Cost Acquired companies Business description P/E Revenue Earnings announced (%) segment (SGD m) (x) (SGD m) (SGD m) 15-Oct-15 TradeGlobal (US) e-commerce enabler for fashion retailers 96 E-commerce 236.0 09-Oct-15 Jagged Peak (US) e-commerce enabler for consumer goods 71 E-commerce 22.1 01-Sep-15 Store Friendly (SG) Personal/business self-storage 100 Log* - Others 12.0 28-Aug-15 E Link Station (HK) Limited parcel locker business 50 Log - Others 1.4 28-Aug-15 Morning Express & Logis(HK) Logistics, documents and parcel delivery 33 Log - Quantium 7.2 14-Jul-15 Rotterdam Harbor Hd (NLD) Freight forwarder and logistics consolidator 80 Log – Famous 12.6 17-Jun-15 Hubbed Holdings Pty Ltd (AU) Parcel delivery in Australia via newsagents 30 Log - Quantium 4.6 14-Jan-15 Famous Pacific Shipping (NZ) NZ-based freight forwarder/NVOCC 90 Log – Famous 8.3 5.0 23.23 1.49 15-Dec-14 Couriers Please (AU) Small parcel delivery business in Australia 100 Log - Quantium 105.0 47.9 122.09 2.19 14-Aug-14 F.S. Mackenzie (UK) UK-based freight forwarder/NVOCC 100 Log – Famous 14.8 17.1 43.07 0.86 10-Jul-14 The Store House (HK) Self-storage solutions 75 Log - Quantium 12.1 13.6 4.90 0.89 28-Feb-14 TRAS-Inter Co. (JPN) Japan-based freight forwarder 100 Log – Famous 3.0 n.a. 7.86 (1.26) 06-Jan-14 Shenzhen 4PX IT (CHN) IT services, imports/exports 18 Log – Famous 12.4 03-Oct-13 EK Media (SG) Online sampling store 100 E-commerce 1.2 4.2 0.74 0.12 23-May-13 Dash Logistics (VNM) Last-mile delivery in Vietnam 30 Log – Quantium 0.4 20-Feb-13 Famous Holdings (SG) SG-based freight forwarder in 6 countries 63 Log 60.0 23.7 116.00 1.60 29-Jan-13 General Storage (SG) Lock + store 100 Log - Others 37.0 20.6 8.40 1.80 18-May-12 Novation Solutions (HK) Digital-printing mail 100 Mail 13.7 7.5 26.63 1.83 16-Aug-11 Indo Trans Logistics (VNM) Integrated logistics in Vietnam 30 Log 15.1 04-Jul-11 Shenzhen 4PX (CHN) Freight forwarding, imports/exports 20 Log 11.5 15-Feb-11 Clout Shoppe (SG) Online shopping 95 E-commerce 0.2 Total 590.7 Avg: 352.9 9.5 15.2 FY15 financials 919.6 157.2 % contributions 38.4% 6.0% * Logistics Source: Company, Maybank KE Notable acquisitions of >SGD15m in dark highlights June 13, 2016 8 Singapore Post Ltd We believe what distinguishes SingPost from the other Asia-Pacific providers of e-commerce logistics services are its complete suite of end- to-end services. These span website construction, site operations, online marketing, customer care & payments, warehousing and fulfilment, freight, customs, last-mile delivery and returns. Fig 13: SingPost’s current capabilities Acquisitions Capabilities e-commerce web services  TradeGlobal  Website development and maintenance  Provides global e-  Jagged Peak commerce platform  Services brands in US and Asia Pacific by helping them expand in Asia  Website development and maintenance are recognised under Retail & e-Commerce.  Fulfillment revenue from client websites shared between Logistics and Mail. Warehouse and fulfillment  FS Mackenzie  SingPost has 24 warehouses in Asia Pacific. Can access >50 warehouses via  Completes the process from  Quantium TradeGlobal and Jagged Peak in China, UK and US point of sales to delivery of Solutions product  Famous  Quantium provides fulfillment, parcel and last-mile delivery in Thailand, Holdings Philippines, Taiwan, India and Japan  Freight forwarding arranges storage and shipping  Quantium provides warehousing solutions in ASEAN, HK, Australia, NZ, Taiwan, India and Japan  Revenue recognised under Logistics.  Famous provides freight forwarding in Singapore, Malaysia, Australia, NZ, Japan, China, US, UK and Europe Last-mile delivery & returns  Couriers  Popstation network in Singapore enables self-collection  Delivering goods to Please doorsteps of end-  In Australia, it operates a nationwide network via Couriers Please & customers. Hubbed.  Revenue shared between Mail and Logistics. Source: Company 3.2 SWOT analysis Strengths Weaknesses Track record and familiarity with Asian markets provides an Dependence on declining mail business edge over logistics MNCs Strategic transformation into integrated e-commerce logistics Low pricing power in mail due to government regulations provider sets it apart from other players New logistics hub should provide capacity for coping with Susceptible to trade flows and ASEAN economic conditions Internet peak seasons, as retailers’ sales are often constrained by logistics bottlenecks. Opportunities Threats Rising demand for end-to-end e-commerce logistics solutions M&A and execution risks Demand for low-cost regional e-commerce distribution Rising delivery and labour costs Quick ramp-up of US-Asia market via TradeGlobal Competition from third-party logistics providers and postal companies June 13, 2016 9 Singapore Post Ltd 4. Long Way from Becoming Formidable in e- Commerce 4.1 Still-small presence SingPost has been developing its non-mail division via M&As since 2011, to fulfil its vision of becoming an e-commerce enabler. This is to compensate for the secular decline in its mail volume and allow it to hop onto the e-commerce bandwagon. Since 2011, it has acquired more than 20 outfits for c.SGD600m. Major acquisitions costing above SGD20m were TradeGlobal (US, SGD236m), Jagged Peak (US, SGD22m), Couriers Please (Australia, SGD105m), FS Mackenzie (UK, SGD15m), Famous Holdings (Singapore, SGD60m) and General Storage (Singapore, SGD37m). These companies focus on e-commerce enabling, parcel delivery and freight forwarding. Although it has established footholds in the e-commerce value chain with a focus on logistics, we reckon that it still has a long way to go. This is because it has yet to integrate most of its M&As, which are themselves facing competition as they are small players in their fields. With limited success in extracting profits from its M&As so far, SingPost continued to rely on its mail business for a 79% chunk of its FY16 operating profit vs 86% in FY11. Fig 14: SingPost has established a small presence in most parts of the e-commerce value chain, with a focus on logistics Strong presence  Global retail e-commerce market = USD1 .6t in 2015.  To grow 13-19% pa up until 2018, accordi ng to e-marketer. Minor presence Major players: Amazon, Alibaba, JD.com, e Bay, Rakuten, Groupon and Lazada. No presence 1.  Commercial banks and credit-card 5. companies.  Notable start-up contenders are PayPal, AliPay, Google Wallet and Square. 2. 4. 3.  Global logistics market worth USD9.2t. Part of USD9.2t global logistics marke t. :  Global e-commerce logistics market worth over USD120b in 2015. Major players: property owners and REITs in Singapore and e-commerce M S ianjgoPro pstla yies rsd: oFmedineaxn,t U PinS, DSHinLg,a Ypaomrea toa nd provides transshipment for overseas j S u ingggPeornsat utosp esurachte ass 2A4m awzoarne, hAoluibsaebs a iann d1 5J Dc.cooumnt.r ies. Maintains inventories for deliveries. several retail brands. In US, has access to >50 warehouses via TradeGlobal and 24 via Jagged Peak. Source: Atgecommercetesting, Company June 13, 2016 10