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Open sesame to e-commerce with Alibaba partnership

Singapore Post (“Sing Post”) shares recently charged to a new high of $1.775, before pulling back to the current $1.75.

Amid mounting investor and analyst interest, the 5-day average daily trading volume has exploded to 11.9m shares, compared to a mere 2.8m a month ago.

Recall, Sing Post announced at end May, a strategic investment and business collaboration pact with Alibaba Group, involving the issue of 220.1m new shares to Alibaba for $312.5m or $1.42/share, and a potential joint venture to create an e-commerce logistics platform focused on Southeast Asian markets.

The market’s fascination with Sing Post likely stems from the fact that it has found a dream partner in Alibaba, which controls nearly 80% of all e-commerce in China, and is currently poised to list in the United States, in what could be the world’s biggest IPO.

Over the past year, stocks around the world with links to Alibaba, including US-based Yahoo!, Japan’s Softbank, and Citic 21CN in Hong Kong, have experienced phenomenal share price increases, as investors scrambled to find ways to participate in Alibaba’s explosive growth.

It appears that Sing Post has now caught the attention of the global investment community as the next potential beneficiary to ride on Alibaba’s wave.

To Sing Post’s benefit, management has been working hard to transform the group. Through mergers, acquisitions and partnerships, Sing Post has been strengthening its logistics capabilities and network, setting the stage for accelerated development of the e-commerce business.

The street no longer views Sing Post as just a defensive, yield play, but as a star with potential to deliver high earnings growth.

The counter trades at 25.9x FYMar14 P/E and 5.1x P/B on 42.9% ROE.

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The information contained in this material is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

Benjamin Oh
Benjamin Oh

Benjamin Oh is an equity analyst at Maybank Kim Eng Research. He specialiszes in formulating special-situation strategies and identifying event-driven opportunities within the Singapore stock market. His contributions are available on Market Insight – an industry-leading feature on KE Trade that provides clients with real-time market intelligence and trading ideas on equities in the region.