Asked on 22 Jul 2019
Discuss anything about Singapore Press Holdings Limited SGX: T39 share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment in Singapore Press Holdings Limited SGX: T39.
Most of us are familair with the Straits Times newspaper that SPH has. But they also invests in properties, provides multimedia, broadcasting and event management services, and operates internet portals. It has a 70% stake in SPH REIT. They business currently has a market cap of 3.94Bn, and is listed on the mainboard of SGX.
SPH has been experiencing a decrease in revenue over the past several years. This can be attributed to the decrease in their media revenue streams. SPH's media revenue streams focuses more on advertising rather than just newspaper sales. But advertising revenue has decreased due to competition from (1) digital marketing and other (2) news outlet.
Digital marketing is more effective than traditional marketing, since it can be focused on your target audience, and is cheaper than marketing on the newspaper. The proliferation of smart phone means that you can get news from many other outlets easily too, and most of the time for free.
Due to the fixed costs that SPH bears, like admin costs, salaries etc, their operating expenditures and cost of sales have not decreased proportionally with revenue. This has decreased profits overall, and weakened profitability.
SPH has recognised the disruption in the media industry, and has expanded into other revenue streams like properties, which may help to buffer against the losses of their media segment.
The more significant effects of Balance Sheet changes over the years are the reduction in investments, and the recent taking on of new long-term debt. This has led to SPH becoming more leveraged than before. The receivables have also experienced quite a significant increase from the previous year, which could be signs of SPH slowly changing their business model by taking on more revenue from non-media sources like properties, or if SPH is extending their credit terms to encourage their advertising customers to stick with them.
Cashflow from operating activties have been decreasing over the years mainly due to decreased revenue. Cashflow from investing activities does not seem to have too much significance over the years. Cashflow from financing activities have been in the red consistently over the last few years. Despite decreases in net income, SPH's dividend payout ratio is still very high (almost close to one). SPH is still cashflow positive due to additional borrowings taken on.
UOB recently made a buy call, with a target price of $2.82, suggesting that the shares are currently undervalued. They argue that SPH REIT has a rally of 6%, and that the resilient assets in the portfolio and their expansion into defensive businesses have been underappreciated. The improved capital efficiency should also free up more free cashflow. SPH's forray into the UK student accomodation market seems interesting, especially with the argument that university enrollments increase during a downturn and UK had an unprecedent international students enrollments last year. This is supposed to hedge against a downturn since this is counter-cyclical.
My sum of the Parts valuation for your consideration:
Intrinsic value is approximately $2.20-2.30 by my calculation. 20% Margin of Safety would be close to $1.80.
Please do your own due diligence prior to taking action.
Hi there, I wrote up a quick handy guide on SPH at https://blog.seedly.sg/singapore-press-holdings-sph-t39-guide. In it, I discussed the business in general, SPH's financial highlights, dividend history, and valuation, among other things.
For those who are interested in SPH for its dividends, the historical dividend trend doesn't look too good.
Extract from the article:
"Total dividend (including special dividend) has fallen from S$0.21 per share in 2014 to S$0.13 per share in 2018. For 2019, dividend dipped further to S$0.12 per share."