SingPost dips further after write-down

SingPost had said last Friday it was reviewing the TradeGlobal acquisition, for which it has taken a hefty impairment charge.
SingPost had said last Friday it was reviewing the TradeGlobal acquisition, for which it has taken a hefty impairment charge.ST PHOTO: NG SOR LUAN

Singapore Post shares lost more ground yesterday after the company said last Friday that it has embarked on a review of an acquisition for which it has taken an impairment charge of nearly 80 per cent.

The counter sank five cents or 3.6 per cent to $1.34 yesterday following SingPost's admission that loss-making United States e-commerce business TradeGlobal, acquired for $236 million in October 2015, had "underperformed".

Though the $185 million impairment announced last Friday may represent a standard move to give SingPost's new chief executive a clean slate when he joins next month, analysts noted that TradeGlobal still faces the same challenges this year with no indication yet as to when it may break even, while group revenue is still not growing fast enough.

CIMB has cut SingPost to hold while OCBC has downgraded it to sell, although Nomura has stuck with a buy rating. UOB Kay Hian maintained a hold call but lowered its target price.

Analyst Valerie Law, in a note published by Smartkarma, said: "While SingPost has taken steps to strengthen corporate governance, these have little impact on stopping the profit erosion in various business segments.

"Until SingPost finds its focus and unique value proposition to the market, it is still early days to buy into a 'turnaround' story."

SingPost has hired FTI Consulting to assess the adequacy of due diligence performed in relation to the TradeGlobal deal.

The decision comes almost 17 months after Securities Investors Association of Singapore chief David Gerald first questioned if SingPost may have overpaid for TradeGlobal.

Mr Gerald noted in January last year that the TradeGlobal deal, SingPost's biggest acquisition in the US, was completed in a month. He also asked: "What due diligence was conducted?"

In response to questions from The Straits Times yesterday, SingPost said: "The price is a function of what can be negotiated with the seller, and is also tested against the comparable industry norms using various valuation metrics."

It declined to comment on who referred it to TradeGlobal, adding: "From time to time, SingPost obtains proposals from bankers, financial advisers and other parties."

A version of this article appeared in the print edition of The Straits Times on May 16, 2017, with the headline 'SingPost dips further after write-down'. Subscribe