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The fate of my investment in SPH.

Monday, January 16, 2017

"At SPH, we recognise the power of sharing in a world that's more connected than ever, across multiple platforms."

Disruption to the media industry is faster and more frightening than I had expected. Actually, if an IT dinosaur like me can be a blogger, I shouldn't be alarmed by this but I am.

That the disruption has impacted SPH is amply evident with its earnings declining in the last few years. DPS declined by 33% or so in the last 5 years and we will probably see DPS dropping by another cent or two this year.

If the decline is seasonal, there is no reason to fear because some months will do better. If the decline is cyclical, we can always wait for the cycle to turn up if we are patient enough. 

However, if the decline is structural, whether a business can do well again would depend on whether it is able to re-invent itself to stay relevant in the face of a new reality.

The move to diversify its business to reduce reliance on the media industry made sense but although SPH has investments in real estate which provides recurring income, the bulk of its fortunes is still tied to the media industry.

Witnessing its decline is very sobering for me. The world is changing and changing fast. What has not changed is my attachment to SPH. I belong to the old economy and I guess SPH still does.

I have been a shareholder of SPH since before the Global Financial Crisis and taking into consideration the years of dividends received as well as the low prices I paid during the Global Financial Crisis, I doubt I have lost money being invested in SPH. 

Even taking into consideration the highest price I paid when SPH REIT was listed in the middle of 2013, with the dividends paid out since, I doubt I have lost money.

Will I add to my investment in SPH now? 

I am happy enough to hold on to my investment but to add to my investment in SPH, there must be a sign that earnings will improve or at least stop declining.

I can see that SPH is changing but is it in the right direction and is it fast enough?

Of course, if Mr. Market should offer me a price that I cannot refuse, even with SPH's declining earnings, I might buy more, but, for now, I am keeping the status quo.

See update here:
Sizing my investment in SPH.


Solace said...

It has been a while, old pal.

Having attachment to a stock is no good you know, Bad AK!:)

Do you classify SPH as a sunset industry? If SPH is only printing newspaper and magazines, it's on its way to be obsoleted. However, SPH is a news producer, it is always in demand. The changing landscape is how news is being distributed. SPH seems to be slow in adjusting to that. SPH being a content producer, needs to decide how to effectively distribute its news content.

In such a changing landscape, "Fake News" and "inaccurate news" are becoming more and more common. I still rely on SPH reporting accurate news daily. Business times still remains a important source of information for stock investing.

Have you tried asking people why they never read Straits Times? No Time? Mistrust due to regulation by Big Daddy? Need to pay money so don't read as there are free source else where? Or merely watch 9pm and 10pm news is suffice? Or Because, So Many people SHARE NEWS on twitters and Facebook? Lol

SPH need to do through FA on its own problem. -__-

Vested at $3.50 in Jan 2016, like i told you before in our last conversation. Still paying close attention if SPH can transform and navigate the changing times.

Kevin said...

Hi AK,

I feel that the decline in the media's business is more to do with the quality of the leadership and also the quality of the media content produced rather than disruption. If you were to look at the board of directors, most of them are from the old economy and quite clueless on how to transform the company.

Amazon bought washington post in 2013 and in less than three years, Bezos transformed the outlook of it and readership soared. Recently, alibaba group bought southern china morning post and I am sure it is on its way to greater heights too.

The quality of news reporting is also lacklustre and lack ground breaking news. Last year, a hong kong news agency managed to expose SMRT's process of shipping back faulty trains back to China. The investigative reporter from hong kong even managed to provide clear photos and video recording of the whole process via a flying drone. This piece of news is really a slap on the face to Singapore's state media as a foreign press manage to report such ground breaking news happening at our own backyard.

AK71 said...

Hi Solace,

You are a voice of reason, as usual.

I wouldn't say it is in a sunset industry. Media is evergreen. However, SPH's business model belongs to the old economy. Yes, it has evolved and I see my niece reading The Straits Times on her iPad. However, from the numbers, it is obvious that more has to be done.

Unfortunately, people prefer trashy stuff and getting the flavour of the day from social media such as Facebook. I am sure some simply do not have time to read or watch the news but many just enjoy the more mindless stuff. If people get the idea that they can get news that matter from social media, that has got to hurt SPH if they are not in the game.

Also, quality reporting cost money but, more and more, people feel that news should be free. Of course, for many years now, we get free newspapers distributed at MRT stations. Recently, I found out the Newpaper is free too. I remember it used to be $1 a copy. I wonder if more print media will go the same way to reach more readers and to gain or retain advertisers. I shouldn't wonder. It is happening.

As media is its core business, that SPH must go digital is obvious and it has done that. How can it convince readers and advertisers to stay with them? With so many options fighting for limited time and advertising dollar, that is a harder challenge.

I will take the seat next to you and watch.

AK71 said...

Hi Kevin,

No newspaper is able to report everything everyday. So, practically, no newspaper is complete in coverage. However, What is worth reporting and what is not worth reporting? That is the question. What would be considered news to the target readers?

I still think that disruption happened. However, if SPH wants to stay relevant, it has to join the movement because it is a tsunami. I can see it trying but, from the numbers, it seems like it is not doing it right nor trying hard enough.

Maybe, it is time for SPH shareholders to storm the next AGM to demand for change! Get a Bezos to helm the Board! Thanks for planting the idea in my head! ;p

K said...

Hi AK,

Will you classify ComfortD in the same category? Customers are taking Uber/Grab cars instead of taxi.


AK71 said...

Hi K,

Of course, Comfort's shareholders should worry when they read news about taxi drivers quitting and the price slashing that is happening because of disrupters. This is a global phenomenon. Taxi companies everywhere are impacted. It is getting harder for companies like Comfort and SPH because the barriers which protected their businesses before are lowering or have vanished.

Serendib said...

Hi AK, while I'd been pretty happy with SPH's dividends over the years, it was very clear to me that in the latter years it really was the property portfolio that was sustaining payouts. When I realised that I myself was only paying for the ST on Sat for the property classifieds, I felt it was time to look for an exit price. That came about last year. My XIRR was very decent (for me) - over 8%pa.
The media landspace locally leaves much to be desired. In the days of fake news, I think good reporting will have a value (I pay for Economist and FT), but SPH has a long way to go - regardless of the platform, content is king!
By contrast, I've been a SingPost shareholder for even longer, and despite the missteps there, you can see they're forcing a reinvention of the company while leveraging on its core strength

AK71 said...

Hi Serendib,

If I weren't already a shareholder for so many years, I probably wouldn't buy into SPH at the price today. I don't think SPH would go the way of the Dodo but it could stay a flightless bird like the Dodo. As I am still able to get a dividend yield of 4.5% to 6% (based on my entry prices) even if they were to cut dividend by another couple of cents, I am willing to give them more time. :)

Kevin said...

Hi AK,

Incoming windfall? ;)

AK71 said...

Hi Kevin,

I see some on FB speculating about this. I am still holding on to my investment in SPH from donkey years ago. Crossing fingers. ;)

AK71 said...

(Bloomberg) -- M1 Ltd.’s owners are exploring options including a sale of Singapore’s smallest mobile operator as the city state gears up for a new entrant into the wireless market, according to people with knowledge of the matter.

Keppel Corp., Axiata Group Bhd. and Singapore Press Holdings Ltd. are working with an adviser to conduct a strategic review of their combined 61 percent interest in M1, the people said, asking not to be identified because the discussions are confidential.

The carrier, which offers fixed-line and mobile services to more than 2 million customers, has a $1.3 billion market value.

The potential sale of Singapore’s third-largest carrier comes as the city state prepares for the roll-out of a fourth mobile operator with TPG Telecom Ltd. slated to begin wireless services in 2018. The regulator has said it wants to introduce more competition in the city state to bring down phone bills and improve services.

Malaysian wireless carrier Axiata has a 29 percent stake in M1, while Keppel has a 19 percent holding and Singapore Press owns 13 percent, according to data compiled by Bloomberg.

Plans to sell Singaporean telecom stakes have made little progress. Shareholders in the second-largest operator Starhub Ltd. were weighing a sale in July, with Qatar’s Ooredoo QSC seeking to sell its indirect stake in the carrier, people familiar with the matter said at the time.

The city state’s current telecom operators including Singapore Telecommunications Ltd. and StarHub are likely to see average revenue per user decline by as much as 16 percent in the next five years, according to OCBC. TPG Telecom may gain mobile revenue market share of about 6 percent by 2021, the research firm said Friday.

Kevin said...

SPH to buy nursing home provider Orange Valley for S$164m

AK71 said...

Hi Kevin,

It is a good business. I hope this is not just a one off event. They should follow through and pursue growth in this area with this foothold. :)

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