SINGAPORE: Shares of Singapore Post saw a sharp selloff on Monday (Dec 23) after the firing of three senior executives raised jitters over the future of the home-grown company.
The stock finished the trading day at S$0.50 (US$0.37), down 10.7 per cent or six Singapore cents. More than 90 million securities changed hands, making it the second-most traded counter by volume.
Singapore's main postal service provider said on Sunday that it had sacked its group chief executive officer (CEO) Vincent Phang, group chief financial officer (CFO) Vincent Yik and chief executive of the company’s international business unit Li Yu after disciplinary proceedings into their conduct were concluded.
The move comes after a whistleblowing report was filed earlier this year about the group's non-regulated international e-commerce logistics parcel business. The three senior executives were found to have been "grossly negligent" in their handling of the internal investigations into the whistleblowing report.
Mr Phang and Mr Yik have indicated that they disagree with and are disappointed in the board’s decision to terminate their employment.
Analysts said the market’s knee-jerk reaction was not surprising given how the termination of three C-suite level executives at one go is “unprecedented”.
“It's very rare to see three senior executives, especially the CEO and CFO, being fired all at one go, especially when there's no fraud involved,” said Maybank Securities analyst Jarick Seet.
The “drastic” action taken by the company’s board has naturally raised some concerns over the outlook of the company, experts said.
“Immediate market reaction often shows up in stock price movements, the long-term impact largely depends on the board’s ability to manage the transition and restore stakeholder confidence,” said Nanyang Technological University Associate Professor of Accounting Kelvin Law.
The latest development comes as SingPost undergoes a strategic review first initiated in July 2023. Earlier this month, it had announced the sale of its Australian business for a cash consideration of A$775.9 million (US$504.1 million).
The sale, subject to the approval of shareholders at an extraordinary general meeting to be held early next year, is expected to generate a gain on disposal of S$312.1 million (US$232.1 million).
OCBC’s Investment Research said it is unclear if the termination of the company’s senior executives “would have any bearing on the transaction”.
“Given that Australia had been a significant growth driver for SingPost in recent years, we maintain our ‘hold’ rating while awaiting further clarity on its next engine of growth, backed by a stronger balance sheet and greater financial flexibility,” wrote OCBC’s equity research analyst Ada Lim in a research note issued on Monday afternoon.
With no “further colour on the company’s strategic growth path going forward”, Ms Lim also raised her equity risk premium assumption up by 50 basis points to 5.5 per cent to “reflect greater corporate governance risks and uncertainty”. Equity risk premium is used to measure the stock’s risk-reward trade-off.
While uncertainties have risen, Mr Seet said he expects the company’s board to likely continue with the direction of reviewing and divesting non-core assets – a move that will help SingPost to be asset-light, bump up its cash position, pare down debt and be able to enhance its shareholder returns.
“We believe that the end-game remains unchanged as the strategic review and monetisation of non-core assets was driven by the board,” added the analyst.
It is also worth noting that the settlement that SingPost paid to the affected customer in this case was “immaterial”, Mr Seet said.
The whistleblowing report received by SingPost had alleged there were manual entries of certain delivery status codes by SingPost's international business unit. These were for international transhipment parcels which the company had agreed to deliver under an agreement with one of its largest customers.
These manual entries were allegedly done without basis or supporting documentation and with the intention of avoiding contractual penalties under the agreement.
Following its internal investigations, SingPost said it informed the customer about the incident. Both parties have agreed on a settlement, which includes paying a settlement sum.
The company, in its announcement on Sunday, said the settlement “is not expected to have a material impact” on the company’s net tangible assets or earnings per share for the current financial year. Also, its business with the customer “has not been materially affected and the contract has since been renewed following the settlement”, it said.
“This is quite important for shareholders because it means that the business is not affected and there’s not going to be any repercussions or reputational loss in this case,” said Mr Seet.
While SingPost shares will likely be in for “some weakness” ahead, the Maybank analyst believes that the latest development will only be a temporary “road bump” as he holds on to his “buy” call for the stock.
Additional reporting by Koh Wan Ting
Continue reading...
The stock finished the trading day at S$0.50 (US$0.37), down 10.7 per cent or six Singapore cents. More than 90 million securities changed hands, making it the second-most traded counter by volume.
Singapore's main postal service provider said on Sunday that it had sacked its group chief executive officer (CEO) Vincent Phang, group chief financial officer (CFO) Vincent Yik and chief executive of the company’s international business unit Li Yu after disciplinary proceedings into their conduct were concluded.
The move comes after a whistleblowing report was filed earlier this year about the group's non-regulated international e-commerce logistics parcel business. The three senior executives were found to have been "grossly negligent" in their handling of the internal investigations into the whistleblowing report.
Mr Phang and Mr Yik have indicated that they disagree with and are disappointed in the board’s decision to terminate their employment.
Analysts said the market’s knee-jerk reaction was not surprising given how the termination of three C-suite level executives at one go is “unprecedented”.
“It's very rare to see three senior executives, especially the CEO and CFO, being fired all at one go, especially when there's no fraud involved,” said Maybank Securities analyst Jarick Seet.
The “drastic” action taken by the company’s board has naturally raised some concerns over the outlook of the company, experts said.
“Immediate market reaction often shows up in stock price movements, the long-term impact largely depends on the board’s ability to manage the transition and restore stakeholder confidence,” said Nanyang Technological University Associate Professor of Accounting Kelvin Law.
Related:
The latest development comes as SingPost undergoes a strategic review first initiated in July 2023. Earlier this month, it had announced the sale of its Australian business for a cash consideration of A$775.9 million (US$504.1 million).
The sale, subject to the approval of shareholders at an extraordinary general meeting to be held early next year, is expected to generate a gain on disposal of S$312.1 million (US$232.1 million).
OCBC’s Investment Research said it is unclear if the termination of the company’s senior executives “would have any bearing on the transaction”.
“Given that Australia had been a significant growth driver for SingPost in recent years, we maintain our ‘hold’ rating while awaiting further clarity on its next engine of growth, backed by a stronger balance sheet and greater financial flexibility,” wrote OCBC’s equity research analyst Ada Lim in a research note issued on Monday afternoon.
With no “further colour on the company’s strategic growth path going forward”, Ms Lim also raised her equity risk premium assumption up by 50 basis points to 5.5 per cent to “reflect greater corporate governance risks and uncertainty”. Equity risk premium is used to measure the stock’s risk-reward trade-off.
While uncertainties have risen, Mr Seet said he expects the company’s board to likely continue with the direction of reviewing and divesting non-core assets – a move that will help SingPost to be asset-light, bump up its cash position, pare down debt and be able to enhance its shareholder returns.
“We believe that the end-game remains unchanged as the strategic review and monetisation of non-core assets was driven by the board,” added the analyst.
It is also worth noting that the settlement that SingPost paid to the affected customer in this case was “immaterial”, Mr Seet said.
The whistleblowing report received by SingPost had alleged there were manual entries of certain delivery status codes by SingPost's international business unit. These were for international transhipment parcels which the company had agreed to deliver under an agreement with one of its largest customers.
These manual entries were allegedly done without basis or supporting documentation and with the intention of avoiding contractual penalties under the agreement.
Following its internal investigations, SingPost said it informed the customer about the incident. Both parties have agreed on a settlement, which includes paying a settlement sum.
The company, in its announcement on Sunday, said the settlement “is not expected to have a material impact” on the company’s net tangible assets or earnings per share for the current financial year. Also, its business with the customer “has not been materially affected and the contract has since been renewed following the settlement”, it said.
“This is quite important for shareholders because it means that the business is not affected and there’s not going to be any repercussions or reputational loss in this case,” said Mr Seet.
While SingPost shares will likely be in for “some weakness” ahead, the Maybank analyst believes that the latest development will only be a temporary “road bump” as he holds on to his “buy” call for the stock.
Additional reporting by Koh Wan Ting
Continue reading...