Higher costs hurt SingPost underlying profit

By Aradhana Aravindan

SINGAPORE (Reuters) - Singapore Post (SingPost) reported a 4.8 percent drop in underlying net profit as the company incurred higher expenses on expansion of its e-commerce-related businesses.

The company, whose biggest shareholders are Singapore Telecommunications (NASDAQ: STEL) and Alibaba Group Holding (NYSE: BABA), has a history dating back to 1819 but is now racing to find a new future in e-commerce as global mail volumes fall.

E-commerce related-revenue, which includes building online stores for its clients and shipping their parcels and packages, accounted for 29 percent of SingPost revenue for the first half of this year, compared with 26.9 percent a year ago.

"The results are slightly light, but investors should look beyond these numbers as the company was in an acquisition phase, which could have led to elevated costs," said Andrew Chow, an analyst with brokerage UOB Kay Hian.

One-off gains were largely responsible for profit climbing to S$53.4 million ($38 million) in the three months to Sept. 30 from S$38.6 million a year earlier, with administrative and other expenses jumping by 43 percent.

The company announced last month that it would buy United States-based TradeGlobal for $168.6 million, following its deal to buy a majority stake in Jagged Peak, another U.S. e-commerce services provider.

Before the two U.S. acquisitions SingPost, which has a market value of $3 billion, had spent about S$180 million ($129 million) on eight deals over the past 12 months.

The company is betting on growth in online shopping in Southeast Asia.

Consultant AT Kearney estimates that online shopping in the region accounts for less than 1 percent of total retail sales, against 6-8 percent in Europe, China and the United States.

It could grow by about 25 percent a year over the next few years in Southeast Asia, the consultancy said in a February report.

Separately, SingPost said the deadline for Alibaba's deal to buy an additional 5 percent stake in the company has been extended until the end of February.

The results were reported after the market close, at which point its shares were down 0.3 percent. The stock has fallen 1.2 percent over the past year, against an 11.6 percent fall for the benchmark index <.STI>.

(Editing by David Goodman)

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