What Happened To Singapore Press Holdings?

Singapore Press Holdings (SPH) is a large media and property company in Singapore. It used to be one of Singapore's most popular and stable stocks among investors. Fast forward to 2020, it has fallen extremely hard and is now infamous for its poor performance in the stock market over the years. Their share price has fallen drastically across the past 5 years from $4.18 per share to $1.07 per share. This is a huge share price depreciation and reflected how quickly investors are abandoning the stock. How exactly did this happen to one of Singapore's largest companies? 

Failure to Adapt

One of the key issues for SPH was its inability to adapt quickly to changes in technology in the 21st century. While other media companies were busy digitalizing their news platforms to accommodate the new generation of consumers, SPH was still focusing on the physical print versions. The management did not have the foresight and did not plan for the company's future adequately. They were not prepared when consumers switched over to digital platforms and were no longer interested in physical copies such as newspapers. The demand for their product dropped drastically over the years and affected their profits significantly. The ad revenue they receive from newspapers has been decreasing every year and this bleeding does not look like it would stop anytime soon. When was the last time you ever saw your friend /family member purchasing a hardcopy newspaper at a shop? The majority of consumers have switched to digital platforms to receive news due to the easy accessibility of smartphones. By the time SPH managed to switch to a digital platform, there was already fierce competition from global media companies that were doing a better job. To make matters worst, SPH's Media segment contributed the most to its revenue (60%). In the first nine months of 2019, the Media's segment profit fell by 32% compared to the previous year. In the first half of 2020, SPH's Media revenue declined by a further 14.3% and they reported a 9.3% fall in half-year profit for 2020. This is an extremely worrying sign indicating the company's demise and poor performance. No reasonable investor would have confidence in a company whose profits have been decreasing every year without any signs of rebounding. You can read more about SPH's poor performance in the first half of 2020 here (ironically from a news article). 

Poor performance in SPH REIT/Property sector 

Personally, I feel that SPH's attempt to diversify its income streams by acquiring properties and even forming a REIT shows how desperate it is to stay afloat. To put it simply, what exactly is a media company doing in the property sector? It is clearly a last-ditch attempt to salvage the company's decreasing profits in its media segment. Also, SPH REIT is a retail REIT that has been hit extremely hard during this COVID-19 pandemic. Their distribution per unit to shareholders for the 2nd quarter of 2020 decreased around 78% compared to the year before. To rub salt in the wound, SPH's United Kingdom student-accommodation properties' revenue has also decreased with many students choosing to end their lease and flying back to their home countries due to the COVID-19 pandemic. SPH allowed the students to not pay rent if they returned home and even offered to refund those that have paid until the end of the year. This is definitely going to make matters much worse for the already struggling SPH. Their property segment was supposed to compensate for their weakening media's performance. Now, it just looks like a double whammy to SPH and shows investors how its 'diversification' is in fact nothing but a disaster. 

 

Unsustainable Dividends

SPH dividend track record is simply a train wreck. They have been handing out ridiculous and unsustainable dividend payouts in a bid to tempt dividend investors for the last couple of years. For example, the dividend yield was 14% in 2017, 12% in 2018, and 11% in 2019. You might be asking yourself 'how is a struggling company paying out such attractive dividends when its profits have been constantly decreasing?'. The short answer is they have been paying out more free cash flow than they are generating. A company would need to borrow money or use company cash to consistently pay out more dividends than the free cash flow it can generate. This is a huge warning sign for a dividend company and is a red flag to dividend investors as it reflects how the dividends are unsustainable and show the poor management of the company. Besides, SPH's dividend per share has been declining by 7% per year for the last 10 years. No sane dividend investor would have confidence in SPH given its poor dividend track record and financials. This is another huge hint of a struggling company with no sight in end. You can read more about why you should avoid SPH for its dividends here. 

You can find out more about SPH's annual report here. 

 

Verdict

I would suggest to investors to avoid SPH's stock as it is a classic example of how huge companies can decline if they are not quick to adapt to changes and are poorly managed. SPH's performance does not look like it would improve in the future unless the management can change the company's strategy drastically and boost investors' confidence once again. 

What's your verdict on SPH? Is it destined to fail or is there perhaps a chance for redemption?