Margins are still generally low, no thanks to intense pricing competition.
Singapore Post’s (SingPost) struggles for its logistics segment in 2017 are expected to continue in 2018, OCBC Investment Research said.
According to a report, margins for logistics are still generally low, no thanks to intense pricing competition. OCBC cited the operating loss from Quantium Solutions Hong Kong, which caused operating losses of $4.2m.
This was caused by a doubtful debt provision for a key customer of the company.
Another SingPost subsidiary, TradeGlobal, which was acquired earlier, posted an operating loss in February 2017 as it had not achieved the underlying profit assumptions of the business plan which supported the investment. This resulted in the restructuring of the entity.
As a result, 2018 should still show flattish underlying earnings for the firm. Growth is expected to show only in 2019.
OCBC analyst Low Pei Han said, "Looking ahead, we expect a gradual ramp-up in utilisation rates of the log hub, but the environment for logistics as a whole is likely to remain challenging."
Lazada Singapore moved its entire warehouse operations to SingPost regional eCommerce logistics hub. This resulted in higher utilisation rates.
Han added, "We look forward to positive results from the execution of the group’s targets from its recent strategic review, which should drive earnings and ultimately the stock price. Recall that the themes include 1) winning in the home market, 2) delivering full value from overseas investments, 3) igniting future growth engines and 4) driving cost leadership."
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