Projected breakeven has been pushed from 2020 to 2021 over "competitive pressures" in the US.

Singapore Post (SingPost) was hit by a heavy $16.7m loss from its e-commerce business in the first quarter of 2019, causing overall profits to plummet by 40.4% to $18.72m. However, analysts are positive SingPost will unlock value from its e-commerce business soon, it’s just that it would take time.

DBS Equity Research analyst Sachin Mittal revised his earnings forecast for 2018 to 2020 from 14% to 8% CAGR, as the e-commerce segment’s breakeven could be pushed from 2020 to 2021 due to “the competitive pressures” in the US business.

OCBC Investment Research analyst Low Pei Han concurred with Mittal and said, “The US market remains challenging, and the group continues to focus on its turnaround plan and the coming peak season.”

Mittal noted that TradeGlobal and Jagged Peak are now reported under US Business in SingPost’s financial statement. “Operating losses widened in 3Q2017 due to foreign acquisitions, TradeGlobal and Jagged Peak,” he said.

Low noted that SingPost’s US businesses experienced pricing pressures and a change in sales mix from higher margin fulfilment services towards lower margin freight services. Mittal added that Jagged Peak has lost a couple of key customers in the US, impacting revenue and profitability.

The two analysts also cited that SingPost’s profit improvements were impeded by labour shortages and higher wage costs that were supposed to support business integration.

Due to the disappointing results, the company took a $185m impairment on TradeGlobal in 4Q2017. “Ongoing cost concerns and revenue losses could also have a negative impact in the medium term,” Mittal said.

Still, Low is positive on the group’s longer-term prospects. “SingPost is well-positioned to benefit from the strong growth in global e-commerce and last-mile deliveries, but time is also required for the execution of plans and synergies to be reaped,” she said.