Singapore Press Holdings

SPH is Southeast Asia's leading media organization with print as its core business. Its source of revenues includes:

•  Newspaper - Dominant newspaper publisher in Singapore. Publishes 18 out of 19 newspaper title in Singapore 
• Broadcasting - 2 Radio Station and 20% stake in free-to-air TV
• Magazines - Publishes more than 100 magazine titles. Regional Expansion through acquisition and organic growth.
• Event Hosting - Mega events such as COMEX and IT Show
• Out-Of-Home(OOH) Advertizing - 11 LED screens strategically located in town area. More than 500 plasma and LCD screens at major malls and banks.
• Properties Rental - Paragon & Clementi Mall.
• Investment - More than S$1b in investment fund. 39.7% of invested fund are telco related.
• New Media - News portals, Online Classified, Search and Directories

 Financial Information
 

	2011 (S$'000)	2010 (S$'000)
Operating Revenues	1,250,972	1,381,071
Profits	409,038	539,103
Operating Margin	32.70%	39.00%
Current Assets	1,209,460	1,648,623
Current Liabilities	487,339	989,911
Current Ratio	2.48x	1.76x
Non-Current Assets	2,679,314	2,585,379
Non-Current Liabilities	1,094,846	938,065
NAV	$1.39	$1.39
Price/NAV	2.76x
EPS	$0.24	$0.31
PE Ratio	16.00x	12.39x
Dividends Yield	6.25%	7.03%
Dividends Payout Ratio	94.40%	80.40%
Return on Assets	10.00%	11.80%
Return on Operating Revenue	31.10%	36.00%
Return on Equity	17.40%	22.40%

Composition of Revenue

As Seen from the revenue composition, the main source of income for SPH comes from advertising through print press. This make SPH a rather cyclical stocks as opposed to what I initially thought. Reason being, during and economic downturn, firms are likely to cut down advertising cost. With lower volume of advertisement, it would adversely affect SPH main source of income. Secondly, during a downturn, recruitment would fall, leading to a fall in recruitment ads which again adversely affect SPH source of revenue generation.

From the Bar Charts which shows the Profit/Revenue/EPS/ROA  for the past 5 years, a downward trend can easily be observed, suggesting a shrinkage of the industry. This does not come as a surprise as the generation move away from the traditional printed news to more convenient and freely available sources of news on the internet. The challenge remain for SPH to keep in pace with the changes as I can only imagine the pace of such changes would accelerate in the future. Recognizing such changes, we can see that SPH is actively seeking alternative source of income, moving into the new media and property sector, especially with the recent acquisition of Clementi mall in addition to the Paragon to  boost rental revenues. However, the acquisition of Clementi mall is a joint venture by SPH and NTUC, and based on other bloggers with much more investing experience than I do, NTUC know nuts about developing shopping malls that can attract consumers.

Dividends History 

2006	2007	2008	2009	2010	2011
$0.24	$0.26	$0.27	$0.25	$0.27	$0.24

Technical Analysis

(1-year daily chart - click to enlarge)

•  Double top at the end of strong uptrend with Divergence pattern observed on the Stochastic oscillator - Very bearish signal
•  Based on Fibonacci retracement, it is currently testing the $3.84 level. 
• Next resistance level - $3.80, which also coincide with the 150SMA, indicating that it may be a strong level of resistance.   

Personal Opinion

With shrinking core business activities and cyclical nature of the stocks, I will stay away from this stock as the current 6+% yield (which is approximately the same as starhub) failed to attract me. However, I might review the stock again if the dividend yield increased to 7 or even 8%.