Singapore Post (SPOST SP) - DBS Research 2018-03-05: Exploring E-commerce Buying Platform And Logistics-related Technology (with Y Ventures)

SGinvestors.io

SINGAPORE POST LIMITED S08.SI Y VENTURES GROUP LTD. 1F1.SI

Singapore Post (SPOST SP) - Exploring E-commerce Buying Platform And Logistics-related Technology

• Singpost signed non-binding MOU with Y Ventures.
• Potential collaboration for e-commerce buying platform and logistics-related technology.
• Positive on these developments if they take off.
• Maintain BUY call, Target Price S$1.61.

What's New

• Singpost has entered into a non-binding memorandum of understanding (MOU) with Y Ventures on 2 March 2018 to explore a potential collaboration for, amongst others: 
  1. An e-commerce buying platform, focussed on cross-border purchases on behalf of consumers, and consolidated deliveries; and 
  2. Logistics-related technology to enhance efficiency across the vertical logistics chain.
• Y Ventures is a data analytics-driven, e-commerce retail and distribution company which was listed on Catalist in June 2017.
• We note that both Singpost and Y Ventures are still negotiating the terms of definitive agreements.

Our initial thoughts

Singpost has good track record in handling cross-border volumes 

• Over the last few years, SingPost has gained traction in its international mail volumes, mainly from Alibaba, with international mail accounting for c. 60% of its total mail volumes as of 9MFY18. 
• Singpost's new Regional eCommerce Logistics Hub is able to handle large cross-border volumes and utilise its parcel sorting machine for parcel deliveries.

On e-commerce buying platform 

• Singpost's US entities, Jagged Peak and TradeGlobal, currently offer various e-commerce solutions to its clients. For example, Jagged Peak's cornerstone software technology can offer end-to-end solutions in 
  1. content management engine;
  2. order management capabilities;
  3. warehouse management; 
  4. and transportation management which can be integrated with clients’ internal systems.
• E-commerce buying platform represents a new area of opportunity for Singpost's existing businesses. While the concept of e-commerce buying platforms on behalf of customers and consolidated deliveries is not new to Singapore – companies including Ezbuy have garnered good traffic in Singapore and in the region – we believe an e-commerce buying platform is somewhat a natural extension of Singpost's existing business, as Singpost already has existing logistics networks and investments in hardware, i.e. its Regional eCommerce Logistics Hub.
• Singpost, with its strong logistics network locally and partnerships in the region, may have operational efficiencies compared to e-commerce buying platform competitors.

Other synergies to be drawn 

• While we believe an e-commerce buying platform is different from Singpost's existing technologies, we believe there are potential synergies to be drawn from collaboration with Y Ventures.
• Logistics-related technology can also potentially help improve Singpost's existing operations.

Recommendation 

• We maintain our BUY call on Singpost, Target Price $1.61, and have yet to input any forecasts in relation to the potential collaboration with Y Ventures as both companies are still negotiating definitive terms.

Sachin MITTAL DBS Vickers | Singapore Research Team DBS Vickers | http://www.dbsvickers.com/ 2018-03-05

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.61 Same 1.61