What's Up with SPH? Based off a Whatsapp Convo

Singapore Press Holdings (SPH)[T39] has not been on my watchlist for a long time. My last purchase of SPH was at the start of 2016, when the market dipped as a whole. I eventually sold off my SPH holdings a few months later, and never bought back because I geared my portfolio towards the 'Smart Nation' idea. Recently, with news that the ex-NOL Chief Executive Officer Mr. Ng Yat Chung would be stepping up to take the reins, I had a Whatsapp session with a couple of close friends. They had received SPH shares as birthday gifts from family members slightly after Chinese New Year 2017 (when the price was roughly (3.40 - 3.50), and got worried after they saw the price dip to to 3.20 range.

I had actually advised them to sell off their SPH shares when they first got them, because I felt that there were better investment opportunities out there. However, I told them my honest opinion - I felt that SPH's investments and subsidiaries lacked synergy (e.g. nursing homes, print media, property management) and that they really needed to modernize their core business. Easier said than done, I know, especially when print media is a sunset industry. However, operating revenue and net profit have steadily decreased four years in-a-row, with the largest drop reflected in FY2016. Accordingly, SPH's Net Profit Margin has consistently decreased along with their revenue and net profit, despite cost-cutting measures. FY2016's operating revenue stood at S$1.124 million, 4.5% lower than FY2015's S$1.177 million. Their Media segment suffered with lower Advertising and Circulation revenue. It is worth mentioning that the drop in operating revenue was buffered by their Property segment, with higher rental revenue from their retail holdings.

Source: Yahoo Finance

The entry of Mr. Ng Yat Chung has thrown the stock price into slight upheaval. With his track record of managing NOL, it is understandable that some public sentiment would be against him. After the announcement, SPH's stock price has sunk to 3.17 as of today (31st May). This figure is the 52-week low, from a high of 4.08.

However, I told my friends that I knew SPH was trying to diversify. Their recent acquisition of nursing home provider Orange Valley might prove to be a successful venture. Singapore currently has an aging population, and experts state that the numbers are only expected to go up. I feel that care for the elderly is a business that has no horizon, and SPH might be able to reap a decent profit on this acquisition. My only concern was that this acquisition move seemed very out-of-the-blue; their other holdings offer little-to-no synergy with nursing homes or the medical sector.

SPH may weaken, but print media is still crucial enough that it will not die out. As new developments arise, and as SPH's venture into nursing homes bears fruit, the price might recover (optimistically speaking). However, this might take time, and I believe there are better investment opportunities in the meantime. I told my friends that my honest opinion was for them to sell off their shares and to park the cash in the Technology or Electronics sector.

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In the meantime, I decided to pick up some shares of Singtel at their recent dip @ 3.76. My views on the Telco are listed in my previous article.

Until next time.


Creed