Highlights of the Singpost-Alibaba Collaboration

If you haven't already know, Singpost announced a trading halt yesterday in the afternoon, pertaining to Alibaba's investment in it. The news can be found here.

Instead of boring you with the nitty-gritty details; let's take a look at the main highlights:

1. Alibaba Investment Limited will invest S$312.5 million to purchase 30 million existing ordinary shares held in treasury by SingPost and 190.096 million new ordinary shares and take a 10.35% stake in SingPost upon completion.
   
2. Both parties are forming a joint venture (JV) to leverage on each other's strengths and distribution networks/technology discuss.
   
3. Currently, SingPost’s e-commerce and related businesses account for about 26% of its total revenue. The CEO has said that he understands that their core domestic business [mailing biz] continues to be under pressure from rapidly declining domestic traditional mail volumes.
   Thus, he is looking at driving growth through Singpost's regional e-commerce logistics and strengthening it to be a regional revenue stream.
   
4. Funds from this investment provide SingPost with financial flexibility to significantly scale up its e-commerce logistics business and build new capabilities as they are poised for growth in the region.

My Opinion

It seems that everything is oiled into place - CEO with the right focus on e-commerce, a strong backing from Alibaba and plenty of ka-ching to expand quickly. 

While Singpost is selling for a relatively high P/E ratio of 23.08 (from bloomberg as at 28 May); if it can turn its e-commerce biz from 26% of its revenue to 50% - it will mark a very strong growth rate like seen from Raffles Medical (growing at P/E 20+ with strong earnings growth over past years) 

Furthermore, it also offers a 3.79% dividend yield, so it can also provide some decent cash-flow for an investor even if it is a long wait for capital gains.

What do you think about this deal for Singpost? Let me know by leaving a comment under my facebook page @ www.facebook.com/kissinvesting. Thanks & HUAT AH!