With a closing price of $0.965 on 16th Nov 2018, it is now in the red with an unrealized loss of 4.96% representing an annualized loss of 0.51% as my holding price is at $1.0093. However, the dividend return for a decade stood at 48.27% and including these dividends, the annualized return is 3.66%. So this highlights the importance of dividend !
10 years ago when I first started investing in SingPost was mainly for its dividend yield, 6.25 cents/share annually or 6.19% yield with reference to my holding price at $1.0093. Then it was considered an "income stock" in my portfolio, that kind of yield probably could only better by S-Reit. At that time, SingPost could be considered a sunset industry due to the fact that demand of postal mail was slowly dying as people shifting to e-mail and paperless statement. With that in mind, my initial intention was not for a long-term investment, would consider divest if the high dividend yield could not be sustained. However, things took a turn in 2014 when China e-commence giant Alibaba bought a 10.35% stake in SingPost at a price of S$1.42/share, a boost to the share price and also a confirmation of its business transformation -- from the sunset postal mail to e-commence + logistic. To be exact, the transformation was started as early as 2009 and it was only in 2014 after Alibaba investment that it changed people perception and started to get the attention of investors. It suddenly has a growth story ! It was then I decided to upgrade it from being an income stock to growth stock in my portfolio.
Things started to get rosy as share price soared to an all time high of $2.16 in 2015 and SingPost also getting more aggressive in acquisition, expanding overseas to grow its business. Perhaps it was this over aggressiveness that eventually led to what it is of today, the share price at 6 years low. The concerns of governance when doing acquisition and the quality of the acquisition are the issues it is facing now. The management knows of those and are now fixing them. The recent earning might reflect the worst could be over but it is still not out of the wood yet as it is continue to rectify those rotten eggs in its acquisitions. Might take some more times to finally get those fix, meaning more weakness in the share price could be expected.
Though my investment is having an unrealized loss excluding dividend return, I do not see a need to divest as the long-term fundamental still intact, just needs time to rectify all those issues. Unlike other listed companies when their core business is diminishing, their only solution is to diversify into other sectors to boost its revenue, SingPost's transformation is based on its existing core business -- postal services. Its leverages on its postal services network infrastructure to enter the e-commence sector. There is no doubts the future belongs to e-commence as almost everyone are on e-commence now.
Investing in a stock is like investing in a business. You can't expect sunny day all the times, business will have its up and down cycle. Should I just focus on its share price performance then I will not be able to appreciate the business that I am investing in. So, including the current downturn, this will be the second down cycle I am facing with SingPost with the 2008 GFC being the first.
Going forward, the number 1 thing would like to see is the management fix the current issues they are facing soonest possible. The new CEO is on the right track so the concern is time. The number 2 thing would like to see the management reinstate the dividend yield back to 6.25 cents/share annually.
Added 17th Nov 2018
Blogger Singapore Dividend Collector posted the following question :-"Hi there. I enjoyed reading your post. Can you please elaborate on 'long-term fundamental still intact'? A little more info. here would be appreciated."
I would say that is a good question so I am obligated to reply that. Should I not able to clearly define the fundamental that I am using then it is a question mark over my ability as an investor, the one who treat invest in stock like investing in a business. Having say that, I must also stress that fundamental is a very subjective view. What one view would be very different from the other. Thus, what I deem as long-term fundamental of SingPost might not be the same to another.
For me, SingPost as a corporation on its old core business postal mail services is considered "dead". That is no longer belong to the fundamental that I am viewing now. What I am viewing now is the leverage on its postal services network infrastructure to tap into the e-commence sector. E-commence like it or not will be the future and I don't think anyone could argue that. Even for me not a fan of online shopping also can't help the resist to shop occasionally. Users on Lazada, Qoo10, AliExpress, etc would have realized the delivery of the items sometime are done by SingPost be it put it in the letter box (if the item is small enough to chuck it in), door-to-door delivery or picking up at POPStation. SingPost is basically using its infrastructure to service as a middleman to deliver what retailers are buying online to them physically. That is one part of the fundamental that will never be changed (probably not in my lifetime haha). The second part of the fundamental is its various SingPost Offices (including its HQ at Paya Lebar) scattering around the island. Some of those are actually sitting on self-own land (a hidden value to SingPost as a whole which they could unlock by selling and lease back). The HQ is being developed into an office-cum-retail space to collect rents while the other branches are actually being themed based on their location. Killiney Road branch being located near the heart of Orchard Road has actually a cafeteria in it, a potential stop for shoppers along Orchard Road to take a break there. Branches in the central business district like Raffles Place are of importance as it brings lot of convenience for those offices around there. Sending of greeting cards, new year calender to clients in bulk will not be easy if without those branches there. SingPost branches don't just offer postal services, it includes multiple services like remittance of money, sending in for repair + collection of electronics equipment for certain companies, loan applications, buying of insurance, application/collection for government related stuffs, etc. These services might not bring in the huge revenue for SingPost but it has in a way become part of the lifestyle to the people. These fundamental might not have a sexy story to provide that high growth for the company but on a long-term basis, it is a stable fundamental with gradual or sustainable growth. Unless there is another entity operates similarly to SingPost else its long-term fundamental is not easily being derailed.
Eye-catching business SingPost might not have but if it is not there, things don't look the same.
