It is now more in line with company's performance, an analyst said.
Following shareholder criticism over certain acquisitions and a subsequent special audit, Singapore Post’s (SingPost) remuneration structure has been aligned with the company’s underlying performance, Maybank Kim Eng found out.
Citing the company’s annual report, Maybank KE found that as a part of underlying net profit it fell by 0.06% in FY2018. In absolute terms, board remuneration fell 14% YoY and was down a whopping 27% from FY2016 levels.
Moreover, the ratio of independent directors increased YoY from 50% to 60%. After the board revamp in the past 18 months, 9 in 10 ten directors now have a service tenure of less than five years, which is a “big positive,” said Maybank KE analyst John Cheong.
Prior to FY2017, SingPost’s board suffered from the issue of a number of independent directors being entrenched in their positions for periods as long ranging as 10-18 years, which Cheong added, obviously raised the question of the true degree of ‘independence’ the previous board.
But the improvement did not only in the company’s board. Maybank KE noted that SingPost has improved its debt structure as indebtedness fell 33% YoY whilst current borrowings and earnings interest grew from 8.2% to 9.8%.
FY2018 current borrowings as a percentage of total significantly dropped from 41% in FY2017 to 10%, which will alleviate refinancing pressures this year. Around 90% of SingPost’s debt is long-term in nature with the earliest refinancing in March 2020.
“The lion’s share of borrowings now is long-term, providing some protection against a rising interest rate environment,“ said Cheong.
Meanwhile, there is potential for several non-core assets to be divested, Cheong said, especially the self-storage businesses that have little synergy with the core business.
“Its headquarters, SingPost Centre, could potentially be divested as the recent refurbishment could help realise better market values,” he added. “On the other hand, we believe some goodwill impairment risks still exist even after the FY2017 haircut, especially so for units like Quantium Solutions that still carry substantial goodwill and are still underperforming.”
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