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Some thoughts on Singapore Press Holdings (SPH) Q2 2012 results

I have got some time on my hands and to be honest not many of my stocks are releasing earnings so I might review SPH.

The earnings and revenues from the newspaper division was largely flat. The main boost to net profit came from their property rental. Clementi Mall contributed more than this time last year, hence the out performance.

The online initiatives look to be barely boosting or making a dent to revenues. As such the tactic for SPH look to be maintain their newspaper and magazine business, get the cash and the market cap to build a property rental business.

The question is whether you are comfortable with them bidding the highest price for all the sub urban land parcels and mall locations. To win, you have to bid, but the amount that they now bid as looks desperate or snobbish to say the least.

  • SPH currently trades at $3.89
  • Number of outstanding shares is 1600 mil
  • The market cap then is $6224 mil
  • Total assets is $3690 mil
  • Total debts is $1012 mil
  • Total cash is $244mil
  • Enterprise value => 6224+1012 – 244 = $6992mil
  • Based on dec 2011 and this upcoming dividend, dividend per share works out to be $0.17+$0.07 = $0.24
  • Dividend yield based on top share price is 6.1%
  • To pay $0.24 cents would require $384 mil
  • Net Debt to Asset ratio => (1012-244)/3690 = 20%

Based on the half yearly results this is what we can gather

  • Newspaper and Magazine revenue: $496 mil, profit: $171mil
  • Treasury and Investment profit: $4 mil
  • Property revenue: $95 mil, profit: $47.8 mil
  • Others revenu: $40mil, profit: $-5.6mil
  • Projected total profits: 217 x 2 = $434 mil
  • Projected total profit from newspaper: 171 x 2 = $344 mil
  • Projected total profit from property rental: 47.9 x 2 = $95.8 mil

The property rental covers 25% of the last dividends. We do know that SPH with UE bidded for the site in Seng Kang. SPH had a 70% stake in that joint venture.

The size of the Seng Kang property is roughly going to be the same as Clementi Mall. That means in 1 year, we project it can add another $30 mil profit. That brings potential profit from property rental to $126 mil.

Based on the newspaper profits (which is not going down) and property rental profit, SPH have no problems paying the 6.1% yield.  Earnings yield is 7%.

From the looks of it i don’t think they will be bumping up their dividends soon.

How cheap is SPH?

  • Price Earnings: 14 times
  • Price to book:  2.79 times

In terms of PE and PTB,  SPH shows the premium accorded to Blue Chips with predictable cash flow. If it is valued at 179% above book value, SPH must be earning some serious return on assets. SPH’s return on asset of 11% on 20% leverage looks above average, but still lower than 19% ROA for Starhub, which is yielding a similar 6.3% yield at $3.17 with price earnings at 15 times.

Going forward, i don’t think SPH is cheap. Perhaps when it gets to PE 10 we can consider. To do that SPH will have to drop to $2.70, which will only happen in a recession.




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Monday 16th of April 2012

if you need liquidity u need to be extra nimble or its money market.

some people shift from safe defensive assets into risky assets in bear. this may be the way to go


Monday 16th of April 2012

NCPS or CPS is not for me because i am not guaranteed as and when i want my money back. i always believe i am not that rich to park some of my money in this type of "investments" because i always believe i need my "capital for investment" anytime when the Bear comes a calling, unexpectedly. Thanks anyway.


Monday 16th of April 2012

hi donmihaihai, its a note to myself. With its kind of business at current earnings yield 7%, i find this is a fair yield. if i can buy that same safe assets when it is yielding 10% i find that it is cheap enough for me to live with the risk.


Monday 16th of April 2012

hi temperament, sadly i think u should have considered the corporate bonds, preference shares and 5-6% yielders. i do not have a good solution.


Monday 16th of April 2012

Ignore historical stock price and comparing against other blue chips.

Tell me why buying SPH at PE of 14 is not cheap while PE of 10 is cheap

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