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SPH: Something for traders and something for investors?

Thursday, August 15, 2013

SPH is looking interesting as Mr. Market has become extremely pessimistic about it, it would seem. SPH's share price has been retracing to supports on lowering volume since 12 April 2013. This seems like a classic low volume pull back.


The MFI, a momentum oscillator which looks at both price and volume, has dipped further into oversold territory but this does not mean that share price will turn up from here immediately, of course. The CMF which measures money flow shows a possible higher low and this is what is interesting for me. Yup, a positive divergence, perhaps.

If my reading is correct, price might drift a bit lower with the 150% Fibo line at $3.99. It might also overshoot to the downside. Then, there could be a rebound and share price could go on to test channel resistance. $4.30, maybe?

OK, I know I shouldn't have done that. Done what? I just gazed into my crystal ball which is actually a bowling ball and tried to look into the future. Bad AK! Bad AK!


Clementi Mall
For income investors, fundamentally, buying at $4.00 a share for a possible annual DPS of 21c to 24c is not a bad idea, is it? We are looking at a dividend yield of 5.25% to 6.00%.

Some people say that investing in SPH is still risky compared to putting money in a 10 year government bond. The SGS 10 year bond now yields some 2.43%. In 2012, the yield was 1.3%.

Source: MAS

Imagine how bond holders were crushed recently but that is another topic.

Well, with gearing level at almost zero and a strong cash position, SPH is a relatively low risk investment for income now, I would argue. So, it is still a good investment for income especially if it is able to yield at least 6% per annum.

For traders who are thinking of doing some counter trend trading, there could be an opportunity here. For investors who are thinking of increasing their long positions for income, lower prices will make SPH even more attractive, of course.

Related posts:
1. Motivations and methods in investing.
2. SPH or SPH REIT?

21 comments:

Money Honey said...

I missed its low price $4.01 level. Later, I was in the buy queue for it at $4.02 but no luck. Its current 4% dividend yield is not bad.

FoodieFC said...

hoping that it drops to 3.6 like how it used to hover b/w 3.6 to 4.

But I highly suspect tts not gg to happen. Smart of SPH to diversify into property

AK71 said...

Hi Money Honey,

Even at $4.02 a share, I think we are looking at a dividend yield of 5.22% if we use a more conservative estimate of 21c DPS which is manageable with its EPS. :)

AK71 said...

Hi FoodieFC,

$3.60? Wah! I would definitely be buying. LOL.

SPH is definitely financially stronger now. Its earnings remain robust but its leverage has fallen dramatically to a single digit percentage.

At $3.60, it would have a dividend yield of 5.83% if we use a conservative DPS estimate of 21c. This is higher than the distribution yield of SPH REIT even at 90c a unit!

Yah, I agree with your sentiment that it is probably not going to happen. ;p

Dividend Warrior said...

Seleatr Mall.
Seletar Mall.
Seletar Mall.

^_____^

AK71 said...

Hi DW,

The time will come, I am sure. :)

MrNg said...

AK, u done it again... Shhh.. I haven got mine... ๐Ÿ˜œ๐Ÿ˜œ

AK71 said...

Hi Mike,

Er... What did I do? I only did a bit of charting. ;)

MrNg said...

Qualitatively, I like SPH business model. I think some investors dun like the company because of its deteriorating circulation and advertisement business, somewhat similar to the situation at singpost with a weakening mail business. So why did they do? Singpost go big on logistic and SPH diverse into mall development, all this equal, SPH has more success than singpost. However, SPH has a rather poor record in overbidding for malls. Now they have a chance if they overbid again (hope they learn as they progress thou) to pass this bucket to its SPH REIT. When they sell mall to its reits, they get capital recycled and earn extra management aquisition fees. How about the core advertisement and newsapaper segment, I would like to think the deterioration is a foregone conclusion but it will be a long drag then falling off the cliff. The next generation might not read print, but its not like digital photos and film, whereby the world will suddenly stop reading papers. At least not in this decade I feel. SPH is trying to buy online content and platform to slow this deterioration but lets not talk about their record in this area.

So, with the ammo from recycling their capital through their reits, the money could go into mall development, which I feel can more than offset the slowing of the newspaper business.

Just my 2 cents babbling. It's a good but if u view it as a emerging mall developer, but a bad buy if u view as a newspaper company. Think most ppl are view it through newspaper company lens

AK71 said...

Hi Mike,

I like your qualitative analysis of SPH. Thanks for sharing. :)

Its print business is slowly but surely in decline. Even I have started to read The Straits Times online. That is saying something since I was such an IT idiot and in many ways still am.

Having digital platforms, growing a bigger online presence is the right approach to stemming the blood loss.

I believe that with SPH REIT a reality now, SPH should not trade at $3.60 or so any more. Its numbers are, in many ways, stronger now. Of course, this does not mean that it won't.

Anyway, I have added to my long position in SPH today as, at a few cents above $4.00, I think it is a fairly good investment for income.

sillyinvestor said...

Me too =p, evil smile... hahaha
thats why I am babbling... hehe
Glad that your blog didn't cause the price to shoot up... hahah just kidding

AK71 said...

Hi Mike,

My dear fellow SPH shareholder, I don't think my blog has the power to move Mr. Market. LOL.

MrNg said...

Actually, talking about reading print and reading digital, I used to think there is no difference. But personally for me, I find digital reading useful for speed reading, for wide reading where one can click on one link after another. But for deep reading, in dept understanding of concepts, is till faster to turn pages and make notes as you go. I use to read "the intelligent investor" online. I really gave up after 2 chapters. Not sure if I am the only one feeling this way. Also I hate reading comic online

AK71 said...

Hi Mike,

I don't know about effectiveness but I find it somehow more satisfying to read a printed book than an ebook. I think I am still rather old fashioned, maybe.

Intuitively though, I think I would agree with you. :)

AhJohn said...

Actually, I think MyPaper is a good way, free newspaper with lots of advertisement. People don't mind advertisement in a free newspaper.

AK71 said...

Hi Ah John,

I don't think that is in any way comparable to The Straits Times or The Business Times. Anyway, at $1 a copy, these are almost free really. Of course, they all appeal to different demographics. :)

sillyinvestor said...

Hi AK,

I am doing up more digging of SPH, and looking at the digital platforms of SPH, ST times digital advertisement is rather a flop when compared to CNA, and SG carmart don't have much advertising too. I think your blog is actually doing better in attracting advertisement, haha..

I won't be surprised that digital platforms are the ones pulling margin down.

A quick scenario calculation of the effect of seletar mall and the use of cash proceeds and the increased gearing total 1 billion for mall development can bring about 25% improvement in bottomline, but the catch is, it will happen in 2015 earliest, and lets hope the advertising business hold up well till then...

AK71 said...

Hi Mike,

I also think that the next positive catalyst for SPH will come from Seletar Mall. In the meantime, if share price should weaken, I would accumulate. :)

You think SPH might be interested to sign me up? (innocent look)

Frankly, the regular ads in my blog don't make much as they are mostly the "Pay Per Click" type. When a biggie came along recently, I went and shot it down. :(

Request:

Please consider doing a guest blog post here when you are done digging. I am sure all of us are interested in learning from your research. :)

sillyinvestor said...

Sure, if I can find something not already covered by u and buddies at valuebuddies. Dun want to be caught plagiarizing haha...

AK71 said...

Hi Mike,

You are a writer with plenty of integrity! Salute!

Elvin Liang said...

Our SGS bond rates have become disappointingly pathetic.. which is why even a structured deposit seem to be a better bargain for me.. lol.. shorter term and capital guaranteed.

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