Some how I get the feeling everyone keep saying I hate SPH. I am just more conservative that’s all.
Now that SPH after spinning off SPH REIT they will have roughly 500 mil to re-allocate, it begs the question what would management do?
The standard answer is they will bid and develop more malls and then pushing it to SPH REIT. ROA is around 3-4%
The other suggestion is to buy a media company. They say it is higher. My thoughts is why would they acquire more assets that have a grey future.
Personally, they could replicate SingPost’s capital allocation into new business.
The only thing that I don’t agree are going into complementary business (logistics in the case of SingPost)
This week we got a very interesting story.
Washington Post, owned vastly by Warren Buffett diversified into….. Boilers.
Washington Post didn’t disclose the price it is paying for Forney Corp., an 86-year-old supplier of parts and systems for industrial utilities like power plants. But Mr. Graham, in an interview, described Forney as a "small acquisition."
Forney’s specialties include making igniters and flame detectors for industrial-grade fuel burners, a far cry from the newspapers, television and education businesses that account for the bulk of the Post’s businesses. Then again, some of those businesses have seen sharp declines in recent years: Post Co.’s cash cow, the Kaplan higher education unit, and its namesake newspaper each booked operating losses last year.
Washington Post’s Graham learnt that from his mother, who was a rich socialite who had no choice but to take over the business when her husband had a nervous breakdown.
They learnt much from a board of director named Buffett. The main skill is to be a great capital allocator.
In this case, they probably see that this boiler parts and system maker is a splendid business in terms of ROA.
SPH is not so different from Washington’s Post.
They don’t have to have so much synergy there with their newspaper publishing. The key is to keep the management and let it be decentralize. Give the management full autonomy to run the business.