Stock Review: Singapore Press Holdings (SPH)

SPH closed at $2.76, around its 5-year low. After SPH announced its drop in earnings every quarter, SPH will fall by about 20 cents. The drop became sharper after 31 Jul when it was announced that Ng Yat Chung, ex-NOL CEO, would become the SPH CEO wef 1 Sep 2017. Neptune Orient Lines (NOL) was sold to France CMA CGM and majority shareholders probably lost money.

Many people remember Ng for the wrong reasons, so any price drops beyond fundamentals are good opportunities.

Earnings per Share and Dividends
In Q3 financial report, ended 31 May 2017, YTD Q3 (i.e. Q1+Q2+Q3) Earnings per Share (EPS) is 8 cents, compared with 12 cents in 2016. Earnings for Q4 is expected to be higher due to recognition of 701 Search divestment gains, which will bring the EPS up to (estimated) 16 cents.

Extracted from SPH Q3 Financial Report page 24

Dividends had been steadily falling, from 24 cents in 2012 to 18 cents in 2016. Meanwhile, prices had been mostly kept above $4 earlier, in 2016, SPH spent most of its time around $3.50. (See Annual Report 2016) Dividend payout ratios had been exceeding earnings, which means SPH has been digging into its savings. I disagree with payout ratios above 90%, so my estimated upper cap on the dividend payout based on estimated EPS is 16 x 90% = 14.4 cents (@5% yield = $2.88). If I were a bit more conservative, I will estimate the dividend as 12 x 90% = 10.8 cents (@5% yield = $2.16). 12 cents as EPS is assuming there is no divestment gain.

Extracted from SPH Annual Report 2016

Income sources

As the media business is transforming, SPH can choose to reinvent media, or choose to close its media units and become a property developer. In any case, we don't have much control over what is considered their core business.

My re-representation of data from SPH Q3 Financial Report page 5

The good thing about SPH is that they hold valuable land assets (S$4B in value).

• SPH REIT
• Paragon
• Clementi Mall
• Seletar Mall

They have 2 condo development projects

• Sky@eleven (2010)
• Mixed commercial and residential project at Bidadari, next to NEL Woodleigh MRT (est. 2021)

Recurring SPH investments that I like

• Orange Valley Healthcare (2017) - nursing home
• Mindchamps (2015) - childcare and enrichment centre
• Buzz - convenience kiosks/stalls
• Sphere exhibits and Sphere conferences - event management
• Focus Publishing - town council and CDC magazines

25 Aug 2017 - SPH will write-down S$31M in it's Mediacorp TV investments, following Mediacorp's decision to cease print edition of newspaper TODAY.

My views on SPH

When almost every analyst report recommends a sell on SPH, I am recommending a buy. I currently hold 200 units which I bought on a wimp at $3.90 in the 2015 market correction because they bought 20% stake of Mindchamps. I had since regretted hence had not added any. I will buy SPH at $2.76 as it's at a 5-year low and has a projected 5% yield based on a reduced annual dividend of 14 cents. The price might go lower, and my entry points will be every 5% to cover the 5% dividend opportunity. 

• $2.76 - 2000 units
• $2.62 - 1000 units (-5%)
• $2.48 - 1000 units (-10%)
• $2.34 - 1000 units (-15%)