Does Singapore Press Holdings (SGX:T39) Still Count for a Dividend Play?

SPH

 

 

 

 

 

 

 

 

 

Singapore Press Holdings (SGX: T39) is the national and main publisher for Singapore. It is an STI constituent and has a monopoly on both print and electronic content with 19 licensed newspapers and > 100 magazines.

 

Around 2.8 million individuals read one of the Group’s publications daily. The online editions of the main newspapers also enjoy more > 360 million page views with 23 million unique visitors each month.

 

Business Segments

Singapore Press Holdings (SPH) divides its operations into 3 main segments, namely Newspaper & Magazine; Property and Treasury & Investments.

 

Newspaper and Magazine

The Newspaper & Magazine segment is responsible for the production of content for distribution on print and multimedia platforms including the Internet and mobile devices. As the main driver of the Group’s total revenue, this operating segment readily contributes approximately 77% of the top line in FY2014 (for Fiscal Year Ending Aug)

 

Property

Listed slightly more than a year ago, SPH REIT (SGX: SK6U) is the property arm of the Group which enables it to leverage itself into the local real estate arena. Through the REIT vehicle, SPH owns both Paragon, the premium retail mall plus medical suite/office property located in central Orchard Road and Clementi Mall, a suburban “heartland-type” mall in Clementi area. Both malls have achieved 100% committed occupancy rate in 2013. Seletar Mall, the Group’s joint-venture with United Engineers is a 4-storey family-oriented mall which has recently opened in end-Nov and has already garnered sizable foot traffic. Committed occupancy rate > 90%. The Property arm of the Group contributes around 17% of total revenue in FY2014.

 

Treasury & Investments

A non-core part of its operations, this operating segment holds approximately S$1.63 billion of both long and short-term investments with positions in both investment funds and equity securities.

 

With the advent of alternative news media and social media as distribution platforms, the sustainability of SPH’s monopoly comes into question. Such news sources including Yahoo! (NASDAQ: YHOO) News by , Facebook (NASDAQ: FB) and Twitter (NYSE: TWTR) which help share local news amongst the youth,  potentially impacting the importance of local publications. Despite pressure comings from these alternative sources, Singapore’s print media landscape continues to be well-regulated by the government under the Newspaper and Printing Presses Act (NPPA) of 1974. The NPPA requires a permit for a newspaper to be printed or published, effectively creating an impenetrable barrier to entry in the print space. The economics of the Group’s business is reflected from its declining ROE from 22.4% in FY2010 to 11% in FY2014. Despite its earnings per share averaging around S$0.29/share between FY2010 and FY2014, the Group still maintains its dividend pay-out ratio between 80% and close to 100%.

 

Value in Action

With its property and investments business as its supporting appendages, the Group still does generate a healthy operating cash flow with a relatively low capital spending to boot. The question here is whether the traditional publication business would be severely affected by alternative online news sources.

 

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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.

 

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