Singapore Press Holdings (SPH)

[money]

With the declining trend in its media business, i have always held the view that investors are valuing SPH's business at a high premium and overall at a share price of 3.57 now, i think it is overvalued..

Let me try to give my views for its valuation below...

Based on its latest financial statement, its media earned profits of about 33m and property about 39-40m. Due to some impairment losses in its media, i will be generous, i will take it that its long term recurring profits for media is around 40m per quarter

Extrapolating, its profit for media and property will be around 160m each. Due to the fact that earnings have been declining over the years for media, i would attach it with a lower p/e of 12, so i would value it around 1920m. For its property segment, i will value it more generously at p/e of 16 and so around 2560m, so total of 4480m, with a share count of around 1.6b, it works out to $2.80 per share compared to its current price of $3.57.

Actually, my total annual estimated profits of 320m for property and media is very generous because it is before tax and non controlling interests. For comparison, for full year 2015, SPH's total profits to shareholders is actually 321m and it dropped to 265m for full year 2016. In fact my estimate for full year 2017 will be lower than 265m.

I think SPH is way too overvalued and i wouldnt touch it for anything above $3.

well, the market is taking SPH's declining profits in its media business more seriously now

[cfa]

With the declining trend in its media business, i have always held the view that investors are valuing SPH's business at a high premium and overall at a share price of 3.57 now, i think it is overvalued..

Let me try to give my views for its valuation below...

Based on its latest financial statement, its media earned profits of about 33m and property about 39-40m. Due to some impairment losses in its media, i will be generous, i will take it that its long term recurring profits for media is around 40m per quarter

Extrapolating, its profit for media and property will be around 160m each. Due to the fact that earnings have been declining over the years for media, i would attach it with a lower p/e of 12, so i would value it around 1920m. For its property segment, i will value it more generously at p/e of 16 and so around 2560m, so total of 4480m, with a share count of around 1.6b, it works out to $2.80 per share compared to its current price of $3.57.

Actually, my total annual estimated profits of 320m for property and media is very generous because it is before tax and non controlling interests. For comparison, for full year 2015, SPH's total profits to shareholders is actually 321m and it dropped to 265m for full year 2016. In fact my estimate for full year 2017 will be lower than 265m.

I think SPH is way too overvalued and i wouldnt touch it for anything above $3.

well, the market is taking SPH's declining profits in its media business more seriously now

It seems advertising in the newspapers is something very '' outdated '' now a day ?

[karlmarx]

The downward trend of its profit from the media business has been a long one. And it does not appear that the digital revolution is ending soon. Why would I want to pay for something I can find online? Global news can be easily found online. Local news can be found on CNA. Business news is mostly from SGX announcements or other free news agencies like Bloomberg. Sports news is mostly free online as well. Local sports? Few are keen to read. So what am i paying for? The Life section; but then why would I want to pay so much for that? So what is Straits Times' value proposition? Straits Times has to change to provide the kind of news which cannot be found elsewhere. The only one I think is worth paying for is the Sunday Times.

So to be conservative, SPH should be valued only (or mainly) for its real estate and investment portfolio.

The investment portfolio hasn't performed well, in part due to its large stake in M1 and iFAST.

[Big Toe]

After many years of monopoly and never really having to compete in the early years is leaving the former local media giant struggling. Alongside with free to air television network, matter of time they become completely irrelevant. Unless they re-invent themselves, which I think is not going to happen.

There is little value in Print Ads nowadays as well as TVC, it is expensive to produce and results are meh at best.
They only form a portion of a marketing campaign, whereas during the olden days, they ARE the campaign.

[Ben]

They have it too good a time for too long to the extend that management is a bit complacent, that's my opinion. Even though they knew that Internet is distrupting their business, they probably underestimated its and velocity and the degree of the damages it has caused.

However, I do think that they have now understand the challenges they are facing and is more urgent in their approach to turn this big ship around.

Changing of CEO is a good move, as an old captain may not be able to chart a new course. But whether the new captain can bring back the old glory of the company is yet to be seen.

For one thing, we can see that they are now moving more aggressive into property sector. They are also dipping their toes into the education sector, which is a good move IMO.

Mainstream media will still be relevant for a long time to come, even though it may not be as significant as before. In Singapore context, this segment of the business is "protected". Putting Internet aside, it is unlikely that they will be a new newspaper company in Singapore, so potential competition in this area is as good as no.

Also, no third party can succeed in buying over SPH, due to the way it structured its shares, except, perhaps, Temaske. This itself is another potential catalyst.

At a low enough price, SPH will be a value buy again, IMO. 破船也有三寸钉.

[weijian]

They have it too good a time for too long to the extend that management is a bit complacent, that's my opinion. Even though they knew that Internet is distrupting their business, they probably underestimated its and velocity and the degree of the damages it has caused.

However, I do think that they have now understand the challenges they are facing and is more urgent in their approach to turn this big ship around.

Changing of CEO is a good move, as an old captain may not be able to chart a new course. But whether the new captain can bring back the old glory of the company is yet to be seen.

For one thing, we can see that they are now moving more aggressive into property sector. They are also dipping their toes into the education sector, which is a good move IMO.

Mainstream media will still be relevant for a long time to come, even though it may not be as significant as before. In Singapore context, this segment of the business is "protected". Putting Internet aside, it is unlikely that they will be a new newspaper company in Singapore, so potential competition in this area is as good as no.

Also, no third party can succeed in buying over SPH, due to the way it structured its shares, except, perhaps, Temaske. This itself is another potential catalyst.  

At a low enough price, SPH will be a value buy again, IMO. 破船也有三寸钉.

Some deja-vu from the last 3 years of Singpost, isn't it?
So, will SPH be able to avoid some of the pitfalls that has already fallen onto Singpost (esp the acquisition of TradeGlobal)?

[Big Toe]

SPH is unlike Singpost in such circumstances.
Singpost is in a much better position to turn itself around and move forward.
E commerce has made parcel deliveries much more prevalent, competition has also intensified on all levels.
What is important to note is that it is a growing pie.
I.e China's ZTO has done quite well for itself even though share price has run ahead of its fundamentals.

SPH on the other hand is left holding on to a shrinking pie. Unless they are able to compete digitally on a global/regional level(not going to happen anytime soon), it's all downhill from here for the media business. It's good they are diversifying into other areas becauses chances of them doing better in other areas is higher.

[karlmarx]

SPH will continue to monopolize print media, and Straits Times will continue to be in existence for as long as Singapore's political landscape remains the same; as its primary function is to assist in meeting political, not profit, goals. Even if it is no longer profitable, SPH will still continue to run the national broadsheet.

If the situation of declining circulation -- and therefore declining ad revenues -- continues, then there is a possibility that our local papers may at some point become unprofitable. SPH will not be the first to suffer such a fate. Being in a monopoly may slow down the declining profitability -- who else can you go to run print ads, right? -- but it cannot change the way people are consuming news online, more than ever before.

SPH sends an abridged copy of the zaobao newspaper weekly to schools. And sometimes, ST as well. I'm not sure if student have to pay for these, or if the school pays, or if they are paid by MOE. But if you consider the number of secondary school students (about 180K), the support given to SPH by MOE is not insignificant.

The link below shows the costs to advertise on these papers:

http://sph.com.sg/system/misc/MediaKit20...ia-Kit.pdf

[karlmarx]

SPH is unlike Singpost in such circumstances.
Singpost is in a much better position to turn itself around and move forward.
E commerce has made parcel deliveries much more prevalent, competition has also intensified on all levels.
What is important to note is that it is a growing pie.
I.e China's ZTO has done quite well for itself even though share price has run ahead of its fundamentals.

I also think the business prospects of the industry Singpost is in, is brighter than SPH's. While there are less mail delivered, there are more parcels. So business activity is not declining. For SPH, it is not the case where readers are moving from the physical ST paper to the online ST website; they have stopped reading ST.

The issue for Singpost is the large number of competitors it has. Too many logistics players delivering parcels. More recently, start-up ParknParcel has emerged to become an alternative to POPstations.

[weijian]

SPH is unlike Singpost in such circumstances.
Singpost is in a much better position to turn itself around and move forward.
E commerce has made parcel deliveries much more prevalent, competition has also intensified on all levels.
What is important to note is that it is a growing pie.
I.e China's ZTO has done quite well for itself even though share price has run ahead of its fundamentals.

I also think the business prospects of the industry Singpost is in, is brighter than SPH's. While there are less mail delivered, there are more parcels. So business activity is not declining. For SPH, it is not the case where readers are moving from the physical ST paper to the online ST website; they have stopped reading ST.

The issue for Singpost is the large number of competitors it has. Too many logistics players delivering parcels. More recently, start-up ParknParcel has emerged to become an alternative to POPstations.

hi folks,
Apologize for not clarifying what i meant by the comparison. I wasn't really specifically referring to the new business lines they were getting themselves into, but what i was really comparing was their common "need to use their ample cash to seek out new business lines, while their existing moat gets eroded". When an urgent (uninformed) buyer meets an experienced seller, the buyer ends up with the experience and the seller ends up with the cash - That's what happened for Singpost with TradeGlobal's acquisition.

https://www.valuebuddies.com/thread-276-...#pid141224