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CNBC Exclusive Transcript: Paul Coutts, Group CEO, Singapore Post Limited

Below is the transcript of a CNBC Exclusive interview with Paul Coutts, Group CEO, Singapore Post Limited. If you choose to use anything, please attribute to CNBC, Sri Jegarajah and Martin Soong.

Sri Jegarajah (SJ): Paul Coutts is with us now, Group CEO at Singapore Post, joining us from Singapore. Paul, great to see you. Where are you then with Freight Management Holdings? Because you're looking to buy a 38% stake and once integrated, where does it take you in terms of this journey towards becoming a logistics provider?

Paul Coutts (PC): Yeah, look, I think, yeah, we have to synchronize back to our strategy. But our three key pillars of our strategy, the first being, the focus on reengineering our infrastructure and capability around our postal system here in Singapore, we refer to that as the future of post. The second part is around developing what we see as an emergence of supply chains coming together in B2C and B2B. So moving more towards a B2B2C model. And therefore, FMH plays a key part in that transition. The third piece is about very much renewing our focus on property, particularly here in the Singapore market, but the middle piece of that is the reason for the investment, the 38% stake in FMH. And, you know, we-we definitely see that as a potential for the creation of a second home market. And the acquisition is laying up for the vision, you know, we want to become an e-comm leader, logistics leader and focused on Asia Pac. And Australia is, we believe, a pretty attractive market for the $10 billion courier and express parcel spend in that particular market.

SJ:  Paul, can you break down the business model? Fourth-party logistics, 4PL in layman's terms, because it really looks like the future and I've heard FMH described as an asset light, technology driven, control tower business, what exactly does that mean?

PC: Yeah, so, FMH is very much a platform for its customers to use, and it works around an intelligent system which selects the optimum way to get the product to market either to business or to consumer. And when I say optimum, we that means in the most cost-effective way and obviously satisfying the service levels required as well. And their system has been up and running, so it's been well tested over a long period of time. They continue to invest and upgrade the system on an ongoing basis. And I think it gives us the opportunity, provides the opportunity, for us to have very much a late asset play using that platform and be able to leverage off that platform. But also combine it with a hard asset play. So heavy asset play in terms of our Couriers Please business in Australia, and that business Couriers Please has been growing well, particularly in the last six months through COVID, which is great to see. And Couriers Please have been a key supplier to FMH for a long period of time, so it's a well established relationship. And we see this as a kind of natural next step in terms of that relationship.

Martin Soong (MS): Paul, Martin here, let me quickly jump in with a question. Good to see you and hope you're continuing to keep safe. So far the outside independent take on this deal is that yes, it's going to be accretive. But it's a little on the pricey side of it. But okay, fine. It helps you to scale your operations in Australia. I want to-I want you to talk to us rather about your bread and butter, though that is simply mails, parcels packages, domestic versus international. Domestic is in structural decline. I think you'd be the first to admit that - the question is whether international is going to be enough to offset that. When you know, a lot of the stuff flying about between households and warehouses. It's stuff that people buy online. Right. And all this stuff is undertaxed cross border. How do you offset that?

PC:Yeah, sure. So I mean, it's a really good question there, Martin, and, you know, it's important to when we talk about domestic being in decline, you know, it's a specific segment of the market that's in decline, and that's the domestic laterals that are in decline. If you actually look at the domestic market as a whole particularly in the e-commerce side, the e-commerce side is definitely booming in Singapore, not surprisingly with a lot more people working from home. Singapore at a penetration rate of about 5% and ecommerce going by 18 months ago. I suspect that will now be in the in the double-digit territory, we're seeing very solid growth. And, you know, we've been very clear that our focus is not only in continuing to service our customers with domestic delivery, and make sure that, you know, we are fulfilling our obligations to residents in Singapore.

But we also want to ensure that we're capitalizing on the e-commerce market. We're seeing very healthy growth again, this year, following healthy growth for the last few years or so. Our market share was up when we estimated it six months ago and 46% of the-of the market, so ecommerce parcel market and in Singapore, you know, so we're seeing very solid growth there. And then on the international side, it's true that the tap in terms of capacity has been turned off, because a lot, a lot more airlines are actually not able to operate into Singapore, and the current environment that's keeping capacity out, but it will come back again. And we are continuing to move international trade via Singapore. And Singapore is in a very, I think, unique position in terms of acting as a Super Hub for e-commerce for the-for the future. And we'll be able to satisfy not only the Southeast Asia region as a market and as a key hub, but also will have a global reach and be able to reach global markets, both west to east as well as east to west so um, so we're pretty confident that the future for international parcels still works, which is very positive. And at some point in time, we do believe it's going to be a replacement for the domestic wearer business.

MS: Gotcha. All right, Paul, listen, great to talk to you. Thanks for spending time with us. Appreciate it. You please continue to keep safe and we'll talk again soon. I had Paul Coutts there, Singapore Post.

END

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