Singapore Post (SingPost) has placed 10 Housing Board (HDB) shophouses currently housing its post office branches across Singapore up for sale, intending to lease them back immediately. A spokesperson confirmed to The Straits Times that this divestment aligns with SingPost's strategy to sell non-core assets, using a sale-and-leaseback model to ensure post office services continue at these locations.

Under this model, an asset is sold but then leased back to the original owner for a set period. This approach is often used when the asset's value has appreciated and allows the seller to generate capital without disrupting operations.

This move is part of SingPost's ongoing strategic review and restructuring. Group CFO Isaac Mah stated in May that the company is working with the government to establish a more sustainable model, as its post office network is unprofitable. SingPost operates 42 post offices, owning 21 of them.

Restructuring efforts include:

• Selling its Australian logistics business, Freight Management Holdings (FMH), for A1.02billion(S853 million) in March 2024.

• Streamlining operations to focus on its core postal and logistics business.

• Considering the sale of its flagship SingPost Centre in Paya Lebar Central (valued at $1.1 billion as of September 2023), another identified non-core asset.

Analyst Jarick Seet (Maybank) noted the shophouse sale-leaseback plan is consistent with SingPost's 2024 announcements about monetizing assets and reducing underutilized postal centers. He cited a significant decline in mail volumes, including an 8.1% year-on-year drop in letter mail and printed paper volumes to 87.8 million items. SingPost has already closed 12 post offices (one-fifth of branches) in the past two years due to this shift to digital communication.

Seet highlighted that public need limits how rapidly SingPost can close more branches, making sale-leaseback a practical compromise. It frees up capital without disrupting services. He added that proceeds could revitalize SingPost's local business (such as its 30 million investment in parcel automation) or be returned to shareholders, evidenced by a recent special dividend of 9 cents per share following a 222.2 million gain from the FMH sale.

Seet reiterated his "buy" recommendation, arguing SingPost is undervalued. The intrinsic value of assets like the HDB shophouses (which have appreciated significantly) and SingPost Centre exceeds the company's current market capitalization. Unlocking this value depends on the company's execution.

SingPost soars 3.51% at 11:08 am, Jun 24th.