Singapore Press Holdings (SPH) recently announced its 1st half results and its property segment now contributes to almost two-third of SPH’s “Profit Before Taxation”. This is a significant contributor to operating profits and marks the close completion of its transformation from a Media Group into a Property Holdings Group.
Nevertheless, from a revenue generation perspective, the Media segment is still bigger in size than the Property segment. Traditional Media remains profitable but is still declining and we just could not see any signs of the rock bottom being formed yet. As such, traditional Media will most probably continue its decline over the next few years and remain a drag on the overall profit margin.
My thoughts are that investors would be better off investing in SPH REIT if the preference is for a pure property rental income play. In the era of Google, Facebook and other online media, it is increasingly hard for SPH to hang on to its traditional advertising revenue. But overall, I quite like the announced results for SPH which clearly shows the transformation exercise from media into property bearing fruit.
New star jewel acquisition- student accommodation business
The student accommodation business is the most interesting part of SPH new business growth strategy. It has been proven that this business segment is virtually recession proof as evident in the performance of this class of property asset during the 2008 financial crisis. The additional acquisition of student accommodation properties will thus strengthen the recurring income stream in all economic environment.
Area of concern to look out for
The sales of only 30 units out of 667 units (only 4.50% sold at VVIP preview) of Woodleigh Residences during the first weekend soft launch in late October 2018 is also extremely worrying. Clearly, the market has slowed down since the various cooling measures rolled out by the government. Trying to sell off units at 2,000psf in the face of diminishing pool of buyers has become extremely challenging. The longer this drags on, the higher the chance that SPH property development will enter into an economic recession with many unsold units. All eyes will be on the planned “official launch” of Woodleigh Residences by end of May 2019. SPH and its partner Kajima had invested S$1.132 billion to acquire this plot of mixed-use site in Bidadari.
|Artist Impression of Woodleigh Residences|
Interim dividend cut and parting thoughts
The slightly disappointing aspect from this recent announcement is that SPH management team had again cut the dividends. Interim dividends got cut from S$0.060 in FY17/18 to S$0.055 in FY18/19. Based on the closing share price of S$2.44 as at 11 April 2019, the projected dividend yield for this financial year will be 5.07%. Summarising, I think that the new growth path lead by its property investment remains intact and will eventually make up for the declining traditional media segment.
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