Singapore Press Holdings Limited (SGX: T39) is trading near a five-year low. Its current share price of S$2.47 is more than 40% below its all-time high.
Here are some things to consider before investing.
Media segment still struggling
One of the reasons SPH shares have performed so poorly is its slowing media segment. The media giant has been severely disrupted by online newspapers and companies choosing to spend their advertising dollars elsewhere, rather than on print newspapers.
The chart below illustrates the magnitude of this shift in spending behaviour.
Source: Singapore Press Holdings 2019 Q1 Earnings Presentation
The charts show the year-on-year revenue decline from print advertising. As you can see, SPH has experienced steep declines in all three segments: newspaper, display, and classified.
More worryingly, the decline in classified advertising revenue accelerated in the first half of 2019, which shows that the downward trend is likely to continue.
SPH’s newspaper circulation also fell 6.2% in the first half of FY19.
While SPH has been trying to pivot and grow its digital media segment, the growth has not matched the steep falls in print advertising and circulation so far, with total media revenue falling 3.8% in the first six months of FY19.
On a brighter note, Singapore Press Holdings does have an alternative source of income. The group has invested heavily into a variety of properties that are being leased out for regular income. It also holds a 70% stake in SPH REIT (SGX: SK6U). In fact, the property segment contributes more than half of the SPH’s net profit.
Last year, the group added a portfolio of UK student accommodations that have started contributing to rental income.
Its investments in property have provided the group with recurring rental income, which helps to soften the blow of its faltering media business.
Time to buy? I think not
Singapore Press Holdings’ traditional newspaper business has been disrupted, with fewer households purchasing newspapers each year.
On top of that, advertisers are seeking more engaging platforms on which to spend their marketing dollars. All of this has had a damaging long-term impact on SPH’s core media business.
At its current share price, SPH sports a price-to-book ratio of 1.15, a price-to-earnings multiple of 14.3, and an annualised dividend yield of 4.4%. Even though SPH’s property segment contributes recurring income, there are numerous REITs that offer higher yields and trade at discount to book values. SPH’s media arm also looks likely to continue to be a drag on revenue and profitability in the future.
All things considered, despite SPH trading near a five-year low, I think there are better alternatives in the market now.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Jeremy Chia does not own shares in any of the companies mentioned.