Would Warren Buffett Buy Singapore Press Holdings?
Warren Buffett’s interest in newspapers is almost as legendary as his investing prowess. He once said that newspapers are “in his blood”. His fascination with the print media began when he started his first job as a paper boy. But what would Buffett make of Singapore Press Holdings SGX: T39)?
Singapore Press Holdings (SPH) is the leading newspaper publisher in Singapore. Its flagship title, The Straits Times, is the most-read newspaper in Singapore with a daily circulation of around 390,000. But that isn’t the only paper it owns. In total it has 18 titles printed in four different languages as well as 100 magazines in its stable.
Apart from being a prolific publisher, SPH is also quite good at turning sales into profit. Its Net Income Margin is one of the highest in the Singapore market. At around 30%, it is generating $30 of profit for every $100 of revenue. By comparison, the Net Income Margin for the 30 companies that make up the Straits Times Index (SGX: ^STI) is around 19%.
SPH’s high income margin goes some way to explain its above-average Return on Equity (RoE). At around 11%, it is generating $11 of bottom-line profit for every $100 of shareholder equity. Worryingly though, the RoE has halved from about 24% in 2010, which would suggest that shareholder are earning less today than they did four years’ ago.
Intriguingly, the decline in the RoE might not be such a big deal for Buffett. He once quipped that when asset values are declining as fast as they have been in the newspaper industry, you have to make a bet on the future. He went on to ask if the company has a viable business strategy, and if so, is it one of growth, of maintenance, or of decline?
In the case of SPH, the decline might not nearly be as terrible as some would make out, given the lack of strong competition and viable substitutes. Or as business guru Michael Porter would say: the company has a competitive advantage.
Another of Buffett’s selection criteria is low specific stock risk. In the case of SPH, its shares are less volatile than the market. That has to be a huge plus. However, Buffett is unlikely to be too impressed by the company’s valuation. It is valued at almost twice its book value. So, as far as Buffett is concerned, it might be a great business with a wide moat around it but, perhaps, not at that price.
The Motley Fool's purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock -- Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock -- Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.
Like us on Facebook to keep up-to-date with our latest news and articles. The Motley Fool's purpose is to help the world invest, better.
"TAKE STOCK" WITH DAVID KUO TODAY -- AND GET A FREE REPORT TOO
Get a FREE weekly dose of our Foolish investing insights when you subscribe to David Kuo's "Take Stock" email bulletin today. And better yet -- you'll also get instant access to a free Singapore investing research report.
“Take Stock” covers all manner of financial topics for our 79,000 readers… from investing in REITs, to finding “hidden gem” stocks on the SGX exchange, to the latest market news from Athens, Beijing, and Washington D.C., and what it means for your investment portfolio.
You've probably seen Dr. Kuo on CNBC and ChannelNewsAsia. Heard him on BBC and 938LIVE. Or read him in The Straits Times and The Independent. You might have even caught his award-winning speech at INVEST Fair 2015. But you've never seen him "unfiltered" like you will in "Take Stock."
By submitting your email address, you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms of Service.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.
Warren Buffett?s interest in newspapers is almost as legendary as his investing prowess. He once said that newspapers are ?in his blood?. His fascination with the print media began when he started his first job as a paper boy. But what would Buffett make of Singapore Press Holdings SGX: T39)?
Singapore Press Holdings (SPH) is the leading newspaper publisher in Singapore. Its flagship title, The Straits Times, is the most-read newspaper in Singapore with a daily circulation of around 390,000. But that isn?t the only paper it owns. In total…