10 things I learned from the 2018 Singapore Press Holdings AGM

Singapore Property Holdings. Excuse me, I meant Singapore Press Holdings (SPH) is not the same as it was ten years ago. The newspaper industry has been disrupted by the Internet. More and more companies prefer to spend their advertising dollars on Facebook or Google — that’s where they can get the most bang for their buck by targeting consumers based on their demographics and interests, instead of blindly advertising to the masses.

Source: Singapore Press Holdings 2018 Annual Report

Newspapers, whether digital or print, face intense competition when there is so much free news content out there. You can keep up-to-date with what’s happening around the world through Channel NewsAsia, BBC, CNN, Bloomberg, CNBC, or whichever your favourite news site is. This trend contributed to the 12.8% declined in SPH newspapers net readership from 2.75 million people in 2009 to 2.40 million people in 2017.

I attended SPH’s AGM to find out how the management plans to stem the decline of their newspaper business, and diversify into property, nursing homes, and e-commerce.

Here are 10 things I learned from the 2018 SPH AGM:

1. Total revenue declined 4.4% to $1,005.7 million in 2018. Despite a 4.0% year-on-year increase in daily average newspaper circulation to 964,400 readers, media revenue decreased by 9.6% to $659.5 million in 2018. Property revenue remained flat at $245.0 million. Over the past ten years, property revenue has not grown and actually declined 4.7%. It has been unable so far to make up for the 35% lost in revenue from the media business.

Source: Singapore Press Holdings

2. Net profit attributable to shareholders declined 19.7% year-on-year to $281.1 million in 2018. This is mainly due to a one-off divestment of a joint venture which boosted profit in 2017. Excluding the one-off gain, net profit attributable to shareholders improved by 2.4%.

3. Dividend per share decreased from 15 cents last year to 13 cents this year. The dividend comprised a normal dividend of 3 cents per share, a special dividend of 4 cents per share, and an interim dividend of 6 cents per share. Based on this and SPH’s share price as at 12 December 2018, its dividend yield is 5.3%.

Source: Singapore Press Holdings

4. There’s a high probability that dividend per share will continue to decline in the future. Recurring earnings continue to fall and it’s unsustainable to pay out more than 100% of earnings for long periods. Capital is needed to develop and acquire new properties.

Source: Singapore Press Holdings

5. Property generates half of SPH’s net profit before tax. Any headwind in the property rental market will greatly affect SPH’s net profit and ability to pay a stable dividend.

Source: Singapore Press Holdings

6. CEO Ng Yat Chun plans to grow SPH’s recurring income by investing in defensive sectors. The company purchased a portfolio of student housing properties in Britain for $321 million. In addition, SPH also acquired Orange Valley Nursing Home — the largest private sector aged care player in Singapore with over 950 beds.

7. An investor asked whether Brexit would have any impact on SPH’s investments there. The CEO said that Britain is filled with top universities and will continue to attract students from around the world. To sustain their economy, he expects education to be one of the key pillars the British will lean onto for growth. He added there are many potential opportunities because people are looking to let go of their properties due to Brexit.

8. A investor asked if SPH had any plans to grow their aged care business abroad. The CEO said that SPH has the right expertise to develop and operating nursing homes and retirement villages, and is looking to work with developers in neighbouring countries.

9. An investor asked why SPH hadn’t sold its underperforming media business like how South China Morning Post was sold to Alibaba. Chairman Lee Boon Yang replied that SPH’s media business remains very profitable, generating $92.8 million in pre-tax profits.

10. A investor asked if SPH is planning to harness the data it’s collected from the digitization of their paper to sell targeted advertisements to subscribers, and whether the management has plans to grow the media business beyond Singapore. The CEO said that it has always been the management’s intention to do so [sell targeted advertisements] which is why they are investing in the digitalisation of the paper. He added that the management is also exploring opportunities abroad as not many English language newspapers have the same standing as The Straits Times in Southeast Asia.

Read more: 4 things to know about Singapore Press Holdings before you invest

Kenny Quek

Kenny Quek is a research analyst at The Fifth Person. He graduated from Drexel University in Philadelphia, PA with a major in finance and previously managed a fund in the U.S. before returning to Singapore.

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