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

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



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