Would Benjamin Graham Buy Singapore Press Holdings Limited?

Singapore Press Holdings (SGX: T39) is a media organisation in Singapore that is involved in print, Internet, television and radio, and outdoor media.

The company publishes 18 newspapers in Singapore in four different languages. With the likes of The Straits Times and Business Times belonging to Singapore Press Holdings, the organisation boasts over three million daily readers on average. That accounts for 76% of all people over the age of 15 in Singapore.

With such a large base of customers you might expect Singapore Press Holdings to be enjoying respectable profits. That would certainly seem the case from a decent earnings yield of 5% on offer.

Whilst this is true, the company has actually seen its net income decline slightly over the last few years. In spite of this investors have enjoyed generous dividends. With the historic dividend yield currently standing just shy of 10%, some four times higher than the risk free rate of return, SPH looks like it may hold some value.

However, on other measures of value, Singapore Press Holdings does not perform so well. Most notably, a stock price that is nearly twice the book value or over four times the current asset value makes the company seem less cheap. This would count as an argument against SPH from the stand point of a value investor such as Benjamin Graham.

What about risk? The debt that the company holds is slightly greater than company’s net current asset value by around 15%. This could be acceptable, since someone such as Benjamin Graham would be happy to settle for an investment with debts of up to twice the book value. Less acceptable may be the current ratio below two. SPH’s current ratio is 1.6.

Singapore Press Holdings might not appear to be cheap from the point of view of a pure value investor, particularly considering the risks. But the company may provide some joy for income investors, although closer attention should be paid to the company’s ability to grow or even maintain its dividends.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.