• Alibaba invests in Quantium Solutions
• Also buys 5% more of SingPost
• Look forward to greater collaboration

Alibaba to invest up to S$92m in Quantium Solutions

Singapore Post (SingPost) announced that Alibaba Group Holding will invest up to ~S$92m in Quantium Solutions International (QSI) for a 34% stake, with SingPost holding the remaining 66%. QSI is currently a wholly owned subsidiary of SingPost providing leading end-to-end ecommerce logistics and fulfilment services across the Asia Pacific region. Its network spans more than 10 countries and it offers e-commerce logistics solutions and warehousing across Asia Pacific. However, with the investment by Alibaba, it will become a JV and it will ramp up the development of e-commerce logistics infrastructure and services.

Will also purchase another 5% stake in SingPost

At the same time, Alibaba will purchase 107.6m new shares amounting to a 5% stake in SingPost for S$187.1m such that its deemed interest on a fully diluted basis in SingPost will rise from 10.23% to 14.51%. The subscription price is S$1.74, which is at an 8% discount to Tuesday’s closing price. This acquisition of additional equity is subject to IDA and SingPost’s shareholder approvals.

Rationale for the moves

According to SingPost, the initiatives will allow QSI to accelerate the build-up of ecommerce logistics infrastructure and services, and will also provide a platform for both parties to strengthen the collaboration and realize synergies. This includes ecommerce warehousing, last mile delivery and other end-to-end ecommerce solutions. A joint strategic business development framework has also been set up.

More details on collaboration with Alibaba

When asked for more details, SingPost revealed that it will be the preferred partner for Alibaba’s foray in Indonesia and Brazil, as well as electronics products in Alibaba’s platform. Amongst the various initiatives they are pursuing, both parties are also looking to build warehouses in and outside of China. In SE Asia, though SingPost is not the only logistics partner with Alibaba, it aims to be a leading partner. Meanwhile we look forward to greater collaboration between SingPost and Alibaba for mutual benefit. Maintain BUY with S$2.19 fair value estimate on SingPost.

Source: OCBC Research - 9 Jul 2015