SPHWarren 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.

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