SingPost short interest spikes on uncertain direction and smaller scale

[SINGAPORE] The short interest in Singapore Post (SingPost) shares has been surging since July, catapulting the counter to the top shorted stock on the Singapore Exchange, S&P Global Market Intelligence analysis showed.

Nearly 5 per cent of its outstanding shares were on loan as at Oct 3.

Concerns emerged over its reduced operational scale and uncertain strategic direction, leading to short interest – defined as the percentage of outstanding shares on loan – building up from late July.

Analysts at S&P Global Market Intelligence noted that the short interest in SingPost started taking off from under 1 per cent on Jul 25; since then, there has been a sharp upward trajectory to being the most shorted stock in Singapore now.

The financial information service provider added: “It appears that Singapore Post’s sharp share price drop in late July reflected concerns over its reduced operational scale and uncertain strategic direction. It also had an impact on the short interest displayed in the company, as the percentage of shares on loan started to increase dramatically after this.”

The downtrend in the counter commenced shortly after SingPost’s annual general meeting, at which some shareholders voiced dissatisfaction over the lack of updates on the reset strategy the group promised after divesting its Australian cash cow Freight Management Holdings.

S&P Global Ratings on Jul 25 downgraded its long-term issuer credit rating on SingPost to “BBB-” from “BBB”, as the group has scaled down with the sale of its Australian logistics and freight forwarding businesses, and its core business continues to face subdued operating conditions.

The national postal service provider has been facing challenges operating a postal business that is on a secular decline and an e-commerce logistics business that is in a highly competitive landscape.

Its operating profit slid 60 per cent year on year for the quarter ended June to S$3.4 million; its top line was 23.8 per cent lower, at S$162.3 million. Its performance was hit by a significant reduction in international delivery and intense competition.

The dismal results prompted some analysts to downgrade the stock and lower the target price, mainly due to a lack of recent catalysts and justification of valuation. Then, Alibaba Investment sold down its stake on Sep 9 to 4.6 per cent from 11.3 per cent. It was SingPost’s substantial shareholder before the sell-off.

The counter closed unchanged at 52-week low of S$0.415 on Thursday (Oct 9).