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SPH: Results are within expectations.

Friday, October 11, 2013

Some people have expressed disappointment at the final dividend of 15c per share announced by SPH. Some people have expressed disappointment at SPH's business performance. What about me?

I am neither disappointed by SPH's final dividend nor its performance because they are within expectations.

I have blogged about how we could see an annual DPS of 21c in future from SPH. If this year's interim and final dividends should become the new norm, then a DPS of 22c a year is 1c more than my lowest expectation. I also said that if I could get a dividend yield of 5% by being a shareholder of SPH, why would I be interested in SPH REIT. That was when I revealed that I increased my long position at $4.20 a share.

SPH's weaker performance when it comes to revenue from its print businesses has been discussed and, some would say, beaten to death. The pertinent question to ask is whether this weakness is going to kill SPH rapidly. Have naysayers focused too much on this and painted a negative picture that is too dramatic?

If we believe that SPH is going the way of the Dodo, then, we should not invest in it. If we believe that SPH has predictable earnings with predictable weaknesses and that its strong balance sheet is able to withstand certain headwinds, then, to be invested for a 5% yield doesn't sound so bad.

Apart from my more recent purchase at $4.20 a share, the majority of my investment in SPH are at prices much lower. Now, even with those purchased at $4.20 a share, I received the recent special dividend of 18c a share. If I do not sell these shares, I would receive another 15c a share later in December this year. That doesn't sound like a bad deal, does it?

SPH is a fortress for anyone investing for income. It is less convincing as a growth story even if we should take into consideration Seletar Mall which is still under construction. Of course, things could change in future and they very often do.

How would Mr. Market react to the results? Your guess is as good as mine. The important thing, as always, is to know what to do in any situation.

See press release: here.

Read a recent guest blog by Mike:
Fundamental Analysis of SPH.

Related post:
"My purchases last month were the highest prices I have ever paid for SPH's stock. Prior purchases were made at between $2.86 and $3.55 a share. However, believing that the management has unlocked value for SPH shareholders in this latest exercise, I am willing to pay reasonably higher prices for the company's stock."


JW said...

Yay I got my SPH lower than AK by 4 cents!

Huat ah!

AK71 said...

Hi JW,

Is that a new way of calculating Margin of Safety? O_o


Tien Song Chuan said...

SPH is just a REIT, nothing more I think.

K said...

I read your article.. big drop in SPH price.. are your views on the busisness still the same after the last results?


AK71 said...

Hi K,

Nothing surprising, really. So, staying invested. :)

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