Friday, December 3, 2010

Singapore Press Holdings (SPH) Stock Review (Part 1)

Singapore Press Holdings (SPH) is a blue chip listed on the Straits Times Index (STI).

I am going to do a concise and straight-forward review about SPH's strengths and prospects in Part 1 because I have decided to increase my holdings of the stock after its Ex-date.

Strengths of SPH:

1. Monopolistic Nature of Core Business:
SPH is the main publisher of newspaper and magazines in Singapore. Its core print business is generating stable cash flow. Being an Asian country, the newspaper readership figure in Singapore is high. This is also especially true in Hong Kong and India too. I guess Asians just have to get their daily newspaper "fix" :)  I am pleasantly surprised by this because the newspaper companies in the West are declining.

                                Primary school pupils discussing current affairs after reading the newspaper

Another positive is that schools in Singapore actually mass order newspaper for their pupils. Most schools order once per week for their English and Mother Tongue lessons. Therefore, this can be considered a long-term business.  The pupils are required to complete at least one newspaper article review per week. I have a friend who is teaching at primary level, so that is how I get to know this info.

Read more about the Newspaper Boom in Asia here. < Click Click :P

2. Property Investment:

Paragon shopping mall is conveniently located in the heart of Orchard Road. Paragon's renovation works had been completed. The luxury shopping mall has achieved almost 100% occupancy rate. 

Clementi Mall, which is a co-venture with NTUC Income, will be opening in two phases starting in Jan 2011. This means that the shopping mall will start contributing rentals from the 2nd Quarter onwards and stabilises in the 3rd Quarter. Clementi Mall is located in an estate with heavy human traffic due to its proximity to the Clementi MRT station, bus interchange, HDB residential homes, Singapore Polytechnic, Ngee Ann Polytechnic, SimUni and NUS. It will be a prime suburban retail hub. 

NTUC Fairprice Finest, National Library Board, Foodfare already confirmed as anchor tenants that occupy plenty of space. Companies like Popular Bookstore, Breadtalk, Macdonalds, KFC, Burger King and Old Chang Kee are usually selected bcos they have good track record.

They shall open in Feb to catch the CNY crowd ^^

Read more about Paragon and Clementi Mall here. < Click Click :P

3. High Adaptability:

Even though its core print business is doing fine at the moment, SPH is not sitting on its laurels. The company is slowly but surely moving towards new media. SPH's newspaper websites, STOMP. Razor TV and are doing great too.

You can visit STOMP, Razor TV and here. < Click Click :P

SPH also created Apps for the iPhone and iPad. The latest tablet PC craze will make newspaper appeal to the tech-savy generation. 

Besides new media, SPH has also divest into managing events such as COMEX, PC Show and Food Festival. 

4. Consistent Dividends with Reasonable Yield:
Yield of about 6% to 7%. Not only give, but maintain the amount of dividends even in the worst global financial crisis in history. SPH gave $270 in cash dividends in 2008 before the sub-prime crisis exploded in the US. In 2009, when the global recession was in full swing, SPH still gave $250 in cash dividends. Many companies cut their dividends or even stop giving dividends totally. It is really reassuring and heartening to know that SPH will still think of the shareholders' welfare in difficult economic times.

5. Capable Management and Leadership:
Dr. Tony Tan. Enough said.

Please let me know your thoughts by commenting below :)

Part 2 will be out soonish, after my buffet dinner at Sakae Sushi, Suntec City. Using my bonus to treat my family to a good meal :)

Peace out,
Dividends Warrior


Anonymous said...

Salute to my fellow SPH-ers !

Dividends Warrior said...

Hi Anonymous,

I salute u back too :) Dividends coming from SPH very soon!

Drizzt said...

bad economics says it all. how would you determine the new ventures profit distriution? imo it will not amount to much. newspaper is a dying business.

风隐 said...

SPH is a solid counter. I'm also looking into load some when price is good. As you mentioned, they have maintained dividends payout even during crissis year. The fundamentals are strong.

Dividends Warrior said...

Hi Drizzt,

Thanks for dropping a comment. It is good to have someone offering a different perspective because obviously nothing is absolutely rosy.

Yes. I agree newspaper is a dying business, but not in Asia yet. Just like e-mail did not kill SingPost. Even if the physical newspaper is killed off, journalism will always live on and they still need to post somewhere. SPH is already setting up successful websites as mentioned in my post for future journalism.

But, who knows the future? Maybe SPH might really go bankrupt or continue thriving. At the end of the day, investors have to buy at their own risk.

Dividends Warrior said...

Hi 风隐,

Yes. The fundamentals are strong. This is my personal opinion. If a company can weather the financial crisis in 2008 and maintain its dividends, it is worth investing in.

But of course, we must be patient and enter at the correct price.

Drizzt said...

why is the fundamentals strong? the only reason being strong is its link to the garment. in terms of free cashflow, take out one time extraordintary gain its negative free doesnt have a huge war chest nor low debts.

its in a sunset industry and the only reason its sustaining is its property rental and dev of new property.

Dividends Warrior said...

Hi Drizzt,

Thanks for dropping a comment with a different opinion.

I think I should describe the fundamentals as "stable" instead of "strong" because like you said, its war chest is not huge and also debt is not low too.

I also agree the property business is currently the major key growth catalyst it has.

At the present price, I think it is overbought. What price do you suggest is fair value?

Anonymous said...

The price of SPH has dropped to $3.99 now. Is it a good price to enter ?

Dividends Warrior said...

I think the price probably will drop abit more in the near future. Historically, SPH's price is lower at the start of the year.

Anonymous said...

Drizzt should read the Year End Report of SPH before he comments. A lot of misconceptions floating about because of the prominent Paragon and Sky@11 properties.

Property amounts to 5% or so of total revenue of the group. 95% is still from its editorial business, chiefly from the English newspapers. The Chinese newspaper group generates lower revenue, and next lower in magazines.

Dividends Warrior said...

Thanks for the clarification :)

Anonymous said...

analysis, imho, seem flawed - company fundamentals is analysed thru' numbers in the blance sheets, and not just some hearsay e.g. primary schools ordering newspapers etc. Also, to pay out consistent dividuals in worsen times is a strategy than profitability (or rewards shareholders for that matter).

Anonymous said...

How do you arrive at a fair value for SPH?

Dividends Warrior said...

Hi there,

I usually look at the P/E ratio.

SPH's P/E ratio is between 12 to 13, which is not considered expensive.

Anonymous said...

First time buy SPH shares, hope the price remain same as at 3.3.11. Hope the dividend is good.

Option tips said...

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Dividends Warrior said...

Hi anonymous,

The dividend is good. The yield is about 6%. Much better than bank's interest rate. ^^

Dividends Warrior said...

Hi Option tips,

Thanks for the complement. ^^

I am glad you find my blog useful.

Alan said...

Hi DW,

Great blog that provide useful info. Planning to invest in SPH shares, do you think its a good time to enter at the current share price?

Alan said...

Sorry, where can we obtain the information of P/E ratio for SPH? I understand the P=Price of the share but how do we get information for the earnings?


Dividends Warrior said...

Hi Alan,

Sorry for the late late reply.

You can find all the financial data from the SGX website.

Dividends Warrior said...

Hi Alan,

The price of SPH is rather high now,

You should have bought just after the Japan Earthquake.

coolingstar9 said...

Dividend Warrior,
Thanks for all your useful information to enlighten me.
On 17-06-2011, SPH share price was $3.82.
I think this was the good price to buy, what is your idea?
Thanks in advance.

Dividends Warrior said...

Hi coolingstar9,

My advise is this. Do not go all in at this moment bcos the market is really in a downtrend and nobody knows when it is going to improve.

You may want to buy a few lots at around $3.82, then if the price drops below $3.80, you can average down more.

Personally, I am waiting at $3.80


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