7 Quick Things I Learned From Singapore Press Holdings’ AGM 2014

Photo credit: transitioning.org

In recent years, digital media has disrupted the business model of traditional print media causing a huge structural change in the industry.

The current generation of readers consume their news less and less from newspapers (myself included) and now get information instantaneously from the Internet and social media at a touch of a smartphone screen.

Newspaper companies around the world are facing this same issue and are doing their frantic best to adapt to the changing environment. Singapore Press Holdings (SPH), the country’s venerable newspaper publisher, is also not spared from this upheaval.

I attended SPH’s AGM this year with an objective to find out how the company plans to deal with this digital revolution. So here are….

7 Quick Things I Learned From Singapore Press Holdings’ AGM 2014

  1. SPH chairman Lee Boon Yang mentioned that media companies throughout the world are experiencing a transition; traditional print media is being attacked by digital technology.sph-graph-1
    Looking at the graph above, SPH’s newspaper & magazine operating revenue has been decreasing year on year. This year, SPH’s newspaper circulation for print and digital editions grew by 1.7%. But the growth is not due to the print editions but rather the digital editions. SPH is now, in many ways, a digital media company and we will continue to see them grow their digital arm in years to come.
  2. SPH pay their dividends through their recurring earnings which are mainly derived from their media, property, and other businesses. Their dividend payout ratio has consistently been above 80% of their recurring earnings and this year their payout ratio was more than 100% of their recurring earnings. The things is, even though SPH’s dividend payout ratio was more than 100% this year, their dividend per share has decreased from 27 cents (2010) to 21 cents (2014).sph-graph-2
    This is because the performance of their newspaper and magazine segment, which contributes 76.7% of their total operating revenue, has been suffering which in turn affects the company’s dividends. As SPH continues their transition in this digital era, we may see their dividend being affected in the near future.
  3. SPH is diversifying their business model by acquiring digital media and education companies. In recent years, SPH has acquired SGCarMart, CoSine Holdings, Mudah.my and MindChamps. These businesses are profitable and directly contribute to SPH’s revenue and profit. Knowing this, a large part of SPH’s focus now is on acquisitions to continue to grow their bottom-line.
  4. SPH’s interest in acquiring digital media companies has led them to set up a $100 million SPH media fund. This fund’s mandate is to invest in digital media startups. Because these companies are startups, higher risk is involved but the long-term payoff is potentially huge. The chairman has stated: ‘Some of these investments would not succeed because of the nature of the investment. Some startups will make it big and pay off very well, and there will always be some that will not turn out well and we have to accept it. SPH will continue to invest prudently and selectively with an eye towards maximizing our investment.’ SPH has a team managing this fund who sources for and studies potential acquisitions. They also have a list of potential startups they are examining at the moment.
  5. In 2013, Telnor, Schibsted Media Group, and SPH teamed up to create two joint ventures to develop high-quality online classifieds in Asia and South America. Schibsted has been one of the more successful companies at handling the transition from print to digital media, while Telnor’s expertise is in the area of mobile communications. In 2014, Naspers Limited partnered the joint ventures for the further development of online classifieds in four key markets – Brazil, Indonesia, Thailand and Bangladesh.
  6. SPH Reits has first right of refusal if SPH decides to divest Seletar Mall. The chairman mentioned that the new mall needs to be nurtured and rental reversion has to go through a certain cycle before they can inject the asset into SPH Reits. Seletar Mall must be able to produce good performance data before SPH will initiate the process.
  7. SPH will continue to look for opportunities in the property sector and evolve new models for managing their malls in order to produce a higher rental yield.

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Victor Chng is an equity investor and co-founder of The Fifth Person. His investment articles have been published on The Business Times BTInvest section and Business Insider. He has also been featured multiple times on national radio on 938LIVE for his views and opinions on how to invest successfully in the stock market. Victor is also the co-author of Value Investing in Growth Companies published by Wiley, Inc. The book can be found in all major book stores worldwide and on Amazon.com, Barnes & Noble and Apple’s iBooks. On a personal note, Victor represented Singapore in the 2008 TAFISA World Games in Busan, South Korea and was the 2008 IFMA World Muay Thai Championships bronze medalist, kicking some serious ass along the way.

2 Comments

  1. M

    December 17, 2014 at 5:37 pm

    Hi,

    The declining recurring earning, which reduces the dividends over the years due to declining traditional prints is widely known, acknowledged and to a certain extent – beyond management’s control.

    However, the other side of the equation, the input cost, specifically the salary and headcounts have been increasing over the years with the declining revenue.

    This is within management’s control and they do not seem to be dealing with it (the recent one-time restructuring and cost saving efforts did not offset the salary and headcount increase).

    This effectively transferring the economic benefits of a declining business from the shareholders to the staffs/management,imho.

    What is your opinion on this? Thanks.

    M

    • Victor Chng

      December 21, 2014 at 1:46 pm

      Hi M,

      You are right about SPH’s increasing cost of salary and headcount over the past few years. Someone did bring up this question during the AGM and the chairman’s reply was that SPH is focusing on improving efficiency to reduce costs instead of just reducing headcount and salaries.

      My personal opinion is that reducing headcount and salaries will definitely boost the company’s profit in the short term. It does not however solve the main challenge of SPH’s declining print media business. I prefer that the management focus on their long-term plans to successfully transit toward digital print media.

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