The Worst Performer in the STI for the Past Decade

Credit: hobvias sudoneighm

Singapore Press Holdings Limited (SGX: T39), which prides itself as being “Asia’s leading media organization,” has not seen its shares perform well at all for the past 10 years. In fact, it’s the only blue chip within the Straits Times Index  (SGX: ^STI) to have clocked losses.

On 31 December 2004, Singapore Press Holdings closed at S$4.60. Around 10 years later, on 26 December 2014, it was at S$4.21. This represents a decline of 8.5%. During the same time frame, the STI added 62%. It seems that investors would have been better-off with putting their money in the SPDR STI ETF  (SGX: ES3), a proxy for the Straits Times Index.

SPH owns 19 newspaper titles, more than 100 magazine titles, online marketplaces like STJobs, STProperty, and STCars, and a huge stake in SPH REIT (SGX: SK6U), a retail mall real estate investment trust that went public last year. Of the 19 newspaper titles that SPH produces, nine are daily newspapers across the four official languages of Singapore. 68% of people above 15 years old read one of SPH’s news publications, be it in print or digital format.

Despite having a seemingly monopolistic position in Singapore’s media landscape, the company has seen its net profits decline from S$488 million in FY2005 (financial year ended 31 August 2005) to S$404 million in FY2014.

The company hasn’t been generating much free cash flow as well. From FY2005 to FY2014, Singapore Press Holdings has only managed to amass positive free cash flow in two years – FY2011 and FY2012. In FY2013, it reported a negative free cash flow of S$260 million.

In FY2014, the firm saw a 2% year-on-year decline in revenue to S$1.2 billion. The main cause of the dip was a 6% fall in revenue from the Newspaper and Magazine segment. Within that segment, advertising and circulation revenue saw declines. As noted by my colleague Ser Jing, “Singapore Press Holdings’ newspaper ad revenue has been seeing consistent year-on-year declines since FY2012”. The trend in Singapore Press Holdings’ advertising revenue is important as it made up 58% of the company’s overall revenue in FY2014.

The advent of tech gadgets, such as the iPad, and the proliferation of social media and online news outlets has hit Singapore Press Holdings hard. If the company wants to improve its fortunes in the next decade instead of being a big laggard like it has been, it would need to do something to prevent a major destruction of its business.

Currently, SPH is going at 17 times its historical earnings.

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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 Sudhan P doesn’t own shares in any companies mentioned.