Singapore Press Holdings (SPH)

[Musicwhiz]

Hi CityFarmer,

While I do appreciate the core business of SPH generating a lot of FCF, it's what's done with the cash that's important. Assuming they plough it in to generate good returns for shareholders, then that's fine. If not, then they should simply increase their payout ratio and make shareholders very happy with the increased payout....

[Temperament]

i wonder if its cheap now. the enterprise value is like 6999 million while the ebitda is around 450 mil. 15 times ev/ebitda?

i don't know how to calculate like many of you. But i know if i can take some profit now, i will. i know i can always buy anytime but not easy to sell anytime with profit.

[KopiKat]

my guess is the loss probably due to unrealized loss in investment?

See the Presentations (Pg 4). For 1H12, 'Treasury & Investment' contributed $4Mil Profits. 'Others' contributed $5.6Mil Losses.

anyway, MICE business should be small enough that SPH does not separate it from the remaining business.

See Presentations (Pg5). 'Others' contributed only 8.7% to Revenue.

Agree, MICE is likely too tiny and possibly still not very profitable at this stage to warrant a separate segment. As 'Others' also likely include their 'Internet' biz (I think ShareInvestor.com + ??), I can't say for sure if the losses from 'Others' are due to MICE or Internet Biz or both. My guess is MICE is giving a profit and losses comes mainly from Internet Biz. This is cos' Losses from 'Others' declined from $15.6Mil in 1H11 to $5.6Mil in 1H12, so, I'm guessing the 'new' MICE biz is responsible for this improvement.

[Drizzt]

actually if i interpret the bs correctly, they are selling their short term investments to finance the properties.

[KopiKat]

actually if i interpret the bs correctly, they are selling their short term investments to finance the properties.

Look at the Cash Flow statement for a more accurate interpretation. Some key figures,

Outflow
- Amount paid to-date for the acquisition of a commercial site = $64,288,000
- Purchase of short-term investments = $50,174,000
- Dividends paid = $273,553,000
- Income tax paid = $28,110,000

Inflow
- Proceeds from disposal of short-term investments = $147,552,000

Net decrease in cash and cash equivalents = $189,611,000

So, your interpretation may not be entirely correct as the amount required for their Property acquisition (for latest Q) is not that huge ie. $64Mil. The bulk of the cash outflow is actually for Dividends Payment.

[Musicwhiz]

I would think 15x EV/EBITDA is rather expensive, then again perhaps SPH is really on a growth path and EV can increase further?

I don't place too much importance on EBITDA though - depreciation is still an expense to me and hits bottom line.

There are many metrics to value a company and I usually prefer ROE and ROIC; or even ROA if it's more applicable.

KopiKat, you've truly analyzed SPH very well. Hats off to you! I have not dug deep enough into the financials and numbers. One reason could be because I am not vested, therefore not so interested.

[CityFarmer]

Hi CityFarmer,

While I do appreciate the core business of SPH generating a lot of FCF, it's what's done with the cash that's important. Assuming they plough it in to generate good returns for shareholders, then that's fine. If not, then they should simply increase their payout ratio and make shareholders very happy with the increased payout....

I agree. As shareholder, i am happy to see that as well.

FYI, FY2011 is 100% payout ratio

---

Agree, MICE is likely too tiny and possibly still not very profitable at this stage to warrant a separate segment. As 'Others' also likely include their 'Internet' biz (I think ShareInvestor.com + ??), I can't say for sure if the losses from 'Others' are due to MICE or Internet Biz or both. My guess is MICE is giving a profit and losses comes mainly from Internet Biz. This is cos' Losses from 'Others' declined from $15.6Mil in 1H11 to $5.6Mil in 1H12, so, I'm guessing the 'new' MICE biz is responsible for this improvement.

There was a related question asked during AGM last year. The answer is "other" carried mainly internet biz which SPH invested. SPH need to maintain all those biz with loses and manegement take it as "insurance premium" for its media biz. It is a necessity for risk management.

In FY2011, the other include MICE. I agree with Kopikat view that the loses mainly due to Internet biz, and improvement in FY2011 very likely due to MICE biz. The loses of "other" been consistent for FY09 and FY10, and improve after MICE biz added.

[Some-one]

Hi CityFarmer,

While I do appreciate the core business of SPH generating a lot of FCF, it's what's done with the cash that's important. Assuming they plough it in to generate good returns for shareholders, then that's fine. If not, then they should simply increase their payout ratio and make shareholders very happy with the increased payout....

I agree. As shareholder, i am happy to see that as well.

FYI, FY2011 is 100% payout ratio

---

Agree, MICE is likely too tiny and possibly still not very profitable at this stage to warrant a separate segment. As 'Others' also likely include their 'Internet' biz (I think ShareInvestor.com + ??), I can't say for sure if the losses from 'Others' are due to MICE or Internet Biz or both. My guess is MICE is giving a profit and losses comes mainly from Internet Biz. This is cos' Losses from 'Others' declined from $15.6Mil in 1H11 to $5.6Mil in 1H12, so, I'm guessing the 'new' MICE biz is responsible for this improvement.

There was a related question asked during AGM last year. The answer is "other" carried mainly internet biz which SPH invested. SPH need to maintain all those biz with loses and manegement take it as "insurance premium" for its media biz. It is a necessity for risk management.

In FY2011, the other include MICE. I agree with Kopikat view that the loses mainly due to Internet biz, and improvement in FY2011 very likely due to MICE biz. The loses of "other" been consistent for FY09 and FY10, and improve after MICE biz added.

Great that these questions have been asked during the AGM. I'll love to ask too but somehow the shareholders always have many questions. In the end, I got no time to ask.

Anyway, back to the question on MICE. Yes, the internet and online business is been lumped together in the others category. However, come to think about it. How much could its internet and online business earns for SPH?

Though I did not ask but it is pretty obvious that the exhibition business would bring in the bulk of the revenue in the others category, considering the huge number of people who attended the IT Show, Commex every year. They have recently acquired the company who organises the IT show (or Commex?).

Looking at the huge number of people who attended these events, they could well earn their revenues from the rental of spaces to those technology companies and would be able to increase their rental income without having these companies running off. These events are good for promotions of their products and businesses.

As written below, during 1H FY2012, the bulk of revenue in terms of percentage growth comes from the Others category again.

First Half Results ending 29 Feb 2012

Operating revenue
Newspaper and Magazine 496,830 499,761 (0.6)
Property 94,867 76,295 24.3
Others 39,160 30,481 28.5

Operating revenue from the Group’s other businesses rose by S$8.7 million (28.5%)
to S$39.2 million, with the increase coming from the internet and exhibitions businesses.

At the moment, the MICE business is too small but look at what the government intends to do for the MICE sector in the following news.

http://www.channelnewsasia.com/stories/s...06/1/.html

The MICE business is growing and I don't think there are a lot of publicly listed businesses in SGX that is dealing with MICE. In any case, there are three reasons why I buy into SPH.

1. The business would still be around 20 years from now.
2. The management decides to diversify to different sectors, knowing that its print business would shrink with the coming of the internet. This shows that the management at least take care of shareholders.
3. It's print business is the monopoly and it is hard to break into the newspaper business in Singapore.

I see SPH as a tortoise who is slowly moving forward. SPH forms part of my stable portfolio. I've got other stocks as growth stocks (e.g. Ezion) so I do not mind sitting back and waiting for the dividends to come in every year while waiting for it to move forward slowly.

[Drizzt]

if u say sph is not cheap, alot of the bluey are not cheap as well. their earnings have to move up. many are at 14-15 times earnings or ebitda

[CityFarmer]

The current DSL and Cable user is ~1.2 Mils. It is logical to assume most will be replaced and move to Fiber network eventually. Let assume we will have 1.2 Mils Fiber network users in the future

RSP like M1 pay wholesale fee to use the Fiber. Currently M1 paid ~S$518 per user annually. In the future, when we reach total user of 1.2 Mils, the total wholesale fee is ~622 Mils annually. So we are talking about a potential market size of ~622 Mils here.

OpenNet is selected as NetCo, which will take 15/21 cut i.e. ~444 Mils per annual

Nucleus Connect is selected as OpCo, which take the rest of the cut. Nucleus Connect is subsidiary of Starhub

M1 is RSP which is also a beneficial of the Fiber network. Starhub is also a RSP

SPH own part of the OpenNet, M1 and Starhub

What is the revenue growth can we expect for SPH?