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SingPost maintains its 'BBB+' S&P rating; outlook stable

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Credit ratings firm Standard and Poor's (S&P) has maintained its "BBB+" rating of Singapore Post (SingPost), according to a Thursday announcement. SingPost was rated "BBB+" in July 2018.

CREDIT ratings firm Standard and Poor's (S&P) has maintained its "BBB+" rating of Singapore Post (SingPost), according to a Thursday announcement. SingPost was rated "BBB+" in July 2018.

S&P gave SingPost a stable outlook, reflecting its expectation that SingPost would consolidate its operations in the logistics and express delivery markets in the Asia-Pacific in the next 12 months. It also foresees that the mail and logistics firm would manage its costs and logistics capacity to support earnings growth and control its profitability decline.

"We also expect SingPost to rein in large acquisitions, given the absence of meaningful rating headroom," it added.

If SingPost fails to keep its debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) ratio below 2.5 times on a sustained basis, the rating could fall further.

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Meanwhile, an upgrade "looks unlikely" for SingPost over the next two years, given its exposure to declining mail volumes and strong competitive pressures in the logistics and express delivery business, S&P’s report noted.

"We may raise the rating if the company establishes a record of consistent governance and successful strategy execution," the agency said.

S&P downgraded its rating for SingPost in November 2016 to "BBB+" from "A-" previously due to the postal service provider’s tolerance for a higher – albeit sustainable – leverage, with a stable outlook. 

The stable outlook reflects S&P’s expectation at the time that the firm’s debt-to-Ebitda ratio would stabilise below 2.5 times by end March 2018.

In February 2016, S&P cut SingPost’s long-term credit rating from "A" to "A-", with a stable outlook amid increased earnings volatility. It also trimmed its rating for the company on the long-term Asean regional scale, as well as its various outstanding debt.

The downgrade followed a Nov 6, 2015 S&P decision to place SingPost on credit watch with negative implications.