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5 Key Takeaways From Singapore Press Holdings Limited’s FY2018 Results

On 15 October, Singapore Press Holdings Limited (SGX: T39), or SPH in short, released its full-year earnings update for FY2018, the financial year ended 31 August 2018.

As a quick introduction for better context before I discuss the company’s latest results, SPH is one of Singapore’s largest media companies and is a constituent of our local stock market benchmark, the Straits Times Index  (SGX: ^STI). Its businesses include newspapers, magazines, radio stations, books, events, advertising, as well as rental income from real estate. It also owns a 70% stake in SPH REIT (SGX: SK6U) and a 22% stake in Mindchamps Preschool Ltd (SGX: CNE).

1. Financial results

SPH had a mixed year. Net profit decreased by 19.7% in FY2018 due to the absence of a one-off gain from divestments in FY2017. Excluding that, SPH’s net profit improved by 2.4%.

The table below shows the key numbers from SPH’s income statement:

Source: Author’s compilation of data from SPH earnings update

It is perhaps worth noting the decrease in SPH’s operating revenue, which includes its core media business. But, SPH has also been diversifying its business through various investments; in FY2018, its investment income grew by 113.8% on divestments of some of its portfolio investments.

2. Business segment information

SPH breaks down its revenue contribution into three segments: Media, Property, and Others. The company’s core media business continues to struggle, with revenue declining by 9.6% to S$655.8 million. Property revenue also inched down by 0.7% to S$242.4 million.

SPH’s media arm has been facing declining print ad revenue and lower print circulation due to the proliferation of online news portals. However, the media business still remains profitable, despite year-on-year profit declines.

Revenue from the property segment was largely unchanged, as mentioned earlier. But profit from the property segment was down by 6.9% because of additional financing costs for the Woodleigh mall project, which is part of a joint venture. The table below summarises the revenue and profit breakdown of SPH by segment.

Source: Author’s compilation of data from SPH earnings update

3. Financial Position

Despite its poorer operating performance, SPH remains in a healthy financial position, with S$1.6 billion in borrowings, S$359 million in cash, and total assets valued at S$6.2 billion. Just S$176 million of SPH’s assets were considered intangible assets, and more than S$4 billion were investment properties.

This puts SPH’s debt to asset ratio at 25.8%, a healthy level in my opinion. It gives the company financial flexibility to make more property or business investments in the future. SPH also generated S$308 million in cash from operations in FY2018 before working capital changes.

4. Developments over the year

In FY2018, SPH made a few investments to diversify its business and to enhance its recurring income.

In the property segment, the company increased its stake in Chinatown Point to 30.68% and its subsidiary, SPH REIT, acquired The Rail Mall. The property segment also held the groundbreaking of The Woodleigh Mall and Residences project in March this year. Residential units are expected to be launched for sale soon.

In addition, SPH acquired a purpose-built student accommodation portfolio in the UK. In total, the accommodation assets have a capacity of 3,436 beds, and have a capitalisation rate of 6.3% based on the purchase price of €180.5 million. The accommodation portfolio will provide additional recurring income and is earnings-accretive for SPH.

SPH also has a stake in Orange Valley, an aged-care business. Orange Valley opened a new care centre at the start of 2018, and is looking to expand its aged-care business locally and overseas.

5. Current stock valuation and dividend yield

SPH’s directors proposed a final dividend of S$0.07 per share for FY2018, comprising a normal dividend of S$0.03 per share and a special dividend of S$0.04 per share. Together with an interim dividend of S$0.06, SPH’s total dividend for FY2018 is S$0.13 per share, which translates to a payout ratio of 76%. The company’s FY2018 dividend is 13% lower than FY2017’s dividend of S$0.15 per share.

At the time of writing, SPH’s share price is S$2.62, which translates to a price-to-book ratio of 1.24, price-to-earnings multiple of 11.7, and a dividend yield of 4.9%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore contributor Jeremy Chia does not own shares in any company mentioned.