Singapore Press Holdings (SPH)

[CityFarmer]

In fact, over these past few years, it is their property segment that is covering up the falling profits from the newspaper segment. With the spinoff of the properties into the reit, their falling profits will become more obvious in the future. Personally, I wont touch a company with falling profits at a p/e of more than 10. Currently, sph's valuation is around a p/e of 15-16. Very high imo

PE is closer to 20 but with the current drop, moving towards 19. Very unlikely it'll hit below 10, unless the whole market become a severe bear (was close to 10 in '08 when STi -50%).

The newspaper segment is a cash cow, and it remains as a "lucrative" cash cow since online news emerged around year 2000.

To add-on with numbers of newspaper segment
2001: Revenue = 960 mil, PBT = 361 mil
2011: Revenue = 1013 mil, PBT = 366 mil

It seems quite resilience so far, but year 2012 seems a "likely" turning point to migrate from paper to online IMO.

2012: Revenue = 1003 mil, PBT = 335 mil

Well, one year difference might not mean anything, but the trend is obvious with SPH management's decisions e.g. charge for online service, push digital subscriptions, and increase investment on online services etc.

Well, i tent to agree with KoipiKat, REIT might be a smokescreen, and also agree that the current valuation is overvalue...

[AlphaQuant]

it's a pity mediacorp is not listed else we can have a look at advertising revenues across different media.

i do wonder how much sph is making from its ventures into shareinvestor, hardwarezone, sgcarmart etc - how much advertising revenue goes online and how much of the pie they are capturing (if there is much of a pie at all!)

that said, i think we are entering into a new paradigm in advertising esp looking at all the efforts by yahoo/facebook/google to go into mobile.

[CityFarmer]

it's a pity mediacorp is not listed else we can have a look at advertising revenues across different media.

i do wonder how much sph is making from its ventures into shareinvestor, hardwarezone, sgcarmart etc - how much advertising revenue goes online and how much of the pie they are capturing (if there is much of a pie at all!)

that said, i think we are entering into a new paradigm in advertising esp looking at all the efforts by yahoo/facebook/google to go into mobile.

SPH's online businesses are included as "Others" segment, together with MICE biz. MICE biz is profitable, while overall "Others" segment is losing, with PBT of -25 mil (in FY2012), so online businesses are losing business for the time being

[KopiKat]

it's a pity mediacorp is not listed else we can have a look at advertising revenues across different media.

i do wonder how much sph is making from its ventures into shareinvestor, hardwarezone, sgcarmart etc - how much advertising revenue goes online and how much of the pie they are capturing (if there is much of a pie at all!)

that said, i think we are entering into a new paradigm in advertising esp looking at all the efforts by yahoo/facebook/google to go into mobile.

SPH's online businesses are included as "Others" segment, together with MICE biz. MICE biz is profitable, while overall "Others" segment is losing, with PBT of -25 mil (in FY2012), so online businesses are losing business for the time being

IMO, these online acquisitions serves more to eliminate the biggest threats to their more traditional source of adverting income. Left alone, these online biz can reduce their market share or even depress the rates. The side benefit is SPH can continue to slowly develop their online model at their usual slow pace...

The bigger threat will likely come from Singtel, who's pumping in a lot of money to acquire online biz...

[Ben]

IMO, these online acquisitions serves more to eliminate the biggest threats to their more traditional source of adverting income. Left alone, these online biz can reduce their market share or even depress the rates. The side benefit is SPH can continue to slowly develop their online model at their usual slow pace...

The bigger threat will likely come from Singtel, who's pumping in a lot of money to acquire online biz...

Thanks KopiKat, I never thought of that before, and it makes sense. For a long time, its Other segment has been making losses...so does that means there are potential upside if SPH can somehow turn its online businesses profitable? Or is SPH deliberately making it difficult for businesses to advertise online so as to stick to traditional print ads?

Anyway, report from OCBC:

SPH reported 2QFY13 PATMI of S$71.6m – down 14.7% YoY mostly due to a lower contribution from the Newspaper and Magazines segment. 1HFY13 PATMI now forms 45% of our FY13 forecast; despite 2Q being a weaker quarter cyclically, we now judge earnings to be tracking marginally below expectations as SPH’s ad revenues suffered the impact of recent cooling property and automobile measures. 1HFY13 rental income from Paragon increased by S$3.4m (up 4.5% YoY) from higher rental rates while occupancies at Paragon and Clementi Mall remained at 100%. The Seletar Mall remains on track to be completed by end of 2014. Management expressed that it is still in the midst of exploring a REIT listing, which continues to be a realistic event, in our view, given the size and quality of its retail malls and the potential for significant shareholder accretion. An interim dividend of 7 S-cents per share is announced. Maintain BUY with an unchanged fair value estimate of S$4.94. (Eli Lee)

[KopiKat]

For a long time, its Other segment has been making losses...so does that means there are potential upside if SPH can somehow turn its online businesses profitable? Or is SPH deliberately making it difficult for businesses to advertise online so as to stick to traditional print ads?

The problem is if they deliberately make it difficult for biz to advertise online, they'll only open up opportunities for new competitors to come in. The barriers to entry in the digital world is not that strong after all. The acquired / own online biz (if well maintained) would act as a stronger barrier in offering their end customers the alternative advertising platform they require.

The proportion of people who're more inclined towards digital media is growing by the day (I reckon most of those who're in their 30s and below) and it's only a matter of time before they dominate the market place. So, altho' Print media will remain relevant for a long time, I suppose it's only a matter of time before they reach the critical mass + right execution / priority for their online ventures to become profitable.

[CityFarmer]

IMO, these online acquisitions serves more to eliminate the biggest threats to their more traditional source of adverting income. Left alone, these online biz can reduce their market share or even depress the rates. The side benefit is SPH can continue to slowly develop their online model at their usual slow pace...

The bigger threat will likely come from Singtel, who's pumping in a lot of money to acquire online biz...

Thanks KopiKat, I never thought of that before, and it makes sense. For a long time, its Other segment has been making losses...so does that means there are potential upside if SPH can somehow turn its online businesses profitable? Or is SPH deliberately making it difficult for businesses to advertise online so as to stick to traditional print ads?

Well, the online biz's losses are necessary and expected, base on management's statement in AGMs.

I don't think Singtel can be a threat to SPH. SPH main biz still media, both paper and online, and it is monopolized by regulation.

[a74henry]

Monopoly by regulation...economic moat.

[Ben]

Well, the online biz's losses are necessary and expected, base on management's statement in AGMs.

Why is it that losses are necessary? I don’t understand. It is fair to expect losses in the short term, due to numbers of factors, but ultimately these businesses should be profitable, which is why they want to buy in the first place. Besides, these online businesses, if left on its own, are growing and profitable, so why should it not be the case when it is run by SPH?

I think I need to make an effort to attend the next AGM and hear from the horses mouth.

[CityFarmer]

Well, the online biz's losses are necessary and expected, base on management's statement in AGMs.

Why is it that losses are necessary? I don’t understand. It is fair to expect losses in the short term, due to numbers of factors, but ultimately these businesses should be profitable, which is why they want to buy in the first place. Besides, these online businesses, if left on its own, are growing and profitable, so why should it not be the case when it is run by SPH?

I think I need to make an effort to attend the next AGM and hear from the horses mouth.

SPH needs significant present in online business world, to avoid irrelevant by surprise.