Singapore Post Limited - Stock Fundamental Analysis
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Is SingPost (SGX: S08) a Good Dividend Stock to Buy Now?

Right now Singapore Post Limited (S08) share price is at SGD$0.540

At this price, SingPost is valued at a P/B ratio of 0.94 and a trailing distribution yield of 3.333%

With the current valuation, would I invest in it?

Let’s go through it using my 7 steps guide and see how I pick the Best Singapore Dividend Stocks.

As a quick recap, here are the 7 steps I use to pick the best Singapore Dividend Stocks.

  1. Debt to Equity Ratio
  2. Dividend Yield
  3. Dividend payout ratio
  4. EPS Growth Rate
  5. Return of Equity (ROE)
  6. Price-to-Book Ratio
  7. MOAT

Recommended Read: Warren Buffet’s 5 Characteristics of a Good Dividend Paying Stock

Business Background

Singapore Post Limited is the dominant provider of domestic and international postal services in Singapore. Founded in 1819 and incorporated in 1992, the company was an exclusive provider of basic mail service in Singapore until 2007, and a non-exclusive provider until 2017.

Business:

  • Post & Parcel (Mail business to both local and international)
  • Logistics (eCommerce)
  • Property (Retail service)
  • Others

Support Facilities:

  • Warehousing
  • Fulfillment and distribution

SingPost is currently focusing on seeking new eCommerce growth opportunities
in Singapore, Australia, and the Asia-Pacific region by improving their Business-to-Business-to-Consumer (‘B2B2C’) logistics capabilities.

DEBT TO EQUITY RATIO

Check for: Less than 0.5 D/E Ratio

Looking at the financial data online.

SingPost have a D/E ratio of 0.377.

This is lower than the 0.5 D/E Ratio.

With a D/E ratio of less than 0.5, this means, the company’s operation is generally driven by equity. A low level of debt will also mean a healthy balance sheet, an important attribute of a good dividend stock.

The company is having a low risk of defaulting.

My Opinion: Pass

Dividend Yield

Check for: More than a 2.5% dividend yield

For the Year 2022, SingPost pay a dividend of 0.013 which translates to a dividend yield of just 2.39%.

This is higher than my target of 2.5%.

YearDividend in SGD
20220.013
20210.011
20200.022
20190.035
20180.035
20170.035
20160.065
20150.075
20140.063
20130.063

The amount of dividends distributed year-on-year from 2017 to date is much lower than in 2016. SingPost was the exclusive distributor of postal services before the year 2017.

I believe that the loss of the exclusive rights has a major impact on the distribution of the dividend.

For the past 10 years, the dividend distributed is decreasing year-on-year.

As the dividend yield is below 2.5%, which is the risk-free rate (CPF OA Account). I will give it a verdict of fail.

My Opinion: Fail

Dividend Payout Ratio

Check for: Less than 80% dividend payout ratio

At the time of writing, a quick check using some of the online tools shows that the dividend payout ratio for SingPost is 35.6% which is below my threshold of 80%.

A payout ratio of less than 50% is a good sign that the company is not at risk of default due to paying out too much of its operating cash to its shareholders.

I think SingPost can have a higher payout ratio of around 50%, but if they are retaining cash flow to expand its logistic business then paying its shareholders less cash make sense.

Personally, I think they really need an upgrade for their system to prepare for eCommerce and improve their logistic capabilities.

My Opinion: Pass

EPS Growth Rate

Check for: More than 10% EPS Growth

Earning Per Share (EPS) is probably what I will be drilling into for dividend stocks. Since this company has been around for such a long time, I will probably have high expectations of its EPS.

A quick check on its financials online.

The EPS 5 year growth rate is a shocking 29.6%.

Yup, the EPS growth for SingPost is over my criteria of 10%!

This is very great!

Seems like their management is doing something right to grow the EPS by more than 10%.

My Opinion: Pass

High Return Of Equity (ROE)

Check for: More than 10% ROE

ROE is one of the most important ratios used by Warren Buffett and his disciples.

Return of Equity gives us an idea of how well is the money being used by the management of the company. The higher the value the better it will be for the investors.

At the time of writing, the ROE of SingPost have an ROE of 4.74%!

Although an ROE of around almost 5% isn’t bad, it is way lower than my threshold of 10%.

The company’s management seems to be just average.

My Opinion: Fail

PRICE-TO-BOOK RATIO

Check for: a P/B Ratio of less than 1.8

SingPost is a multi-million dollar blue chip company with a long rich history of providing postal service locally and internationally.

Therefore, the price of the stock will most likely be traded above its valuation (book value).

At the time of writing, the current P/B ratio of SingPost is 0.940.

Meaning, it is trading at 6% below its book value, which I think is very reasonable.

My Opinion: Pass

MOAT

Check for: Not just having a MOAT, but a great MOAT

SingPost is the dominant player in Singapore for postal and mailing services.

Although they are the dominant player, people usually have a few criteria when selecting their courier providers.

Criteria When Selective Courier Providers:

  • Speed of delivery
  • Cost of each delivery
  • Reliability of the courier provider

Honestly, in my opinion, SingPost is not too bad at meeting these criteria. But there are many other courier providers available which are pretty good as well.

Some of SingPost’s competitors are:

  • Ninja Van
  • Qxpress
  • TaQbin
  • Uparcel
  • GrabExpress
  • Lalamove
  • GetVan
  • GogoX

With so many competitors on their tail, I don’t think SingPost has a very good MOAT.

According to Phil’s book Rule#1 investing, SingPost may have 2 MOATs;

  • A very weak “Switching MOAT” as it is the only provider that has a physical location of their postal service in Singapore.
  • A “Brand MOAT”, as it is a well-known service provider to most Singaporeans.

With the popularity of door-to-door service, the factor of having the physical location of their service may not be as important as it was previously. Thus, the “Switching MOAT” is very weak.

My Opinion: Partially Pass

Overall

SingPost has a final score of 6/10.

With a dividend of <2.5% and a weak MOAT, I think this is not a dividend stock that I will like to invest in.

But on the flip side, SingPost is currently having a low D/E ratio and high ROE.

Therefore, I will keep SingPost on my watchlist.

Below is how I’ve scored SingPost.

MetricsWeightageScore
Debt to Equity RatioHigh (2)2
Dividend YieldLow (1)0
Dividend payout ratioLow (1)1
EPS Growth RateLow (1)1
High Return of Equity (ROE)Low (1)0
Acceptable Price-to-Book RatioLow (1)1
MOATVery High (3)1
TotalNA6
My Singapore Post Limited’s Score Card

If you want to learn more, here are the 3 metrics I’ve found to be more important:

Question…

Would you invest in SINGPOST now?



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What are your thoughts?