StockPick

The figures fm the fllwg table are extracted fm the periodical SHARES Investment (Issue 254),

Note : Stock Split 1-for-5 in 2004, thus lower DIV per share

Buffett's criteria for managerial excellence - Margin and ROE are consistent and looks good for the past 4 years. The figures in 2004 shows a big jump but this is due to the disposal of their stakes in Belgacom and Starhub, which contributed to a larger profit. It'd be better if we can compare Margin and ROE with other cos. in the same biz but, SPH is the only listed co. in SGX in the newspaper publishing industry and that is not possible. Future Homework - To compare with similar cos. in other countries eg. New Straits Time in M'sia.

Other Criteria - I have added DIV as I like to have a good dividend yield and it looks pretty good. EPS is also there to check if the co. is paying too much of their earnings as dividends. SPH paid more dividends in '02 and '03 than their earnings but this could be due to their clearing of Section 44 Credits (allows for tax-free div) before it expires next year(?).

Non-Financial Criteria

1. Simple and Understandable - The business of SPH, based on turnover are Newspaper and Magazines (86.6%), Broadcasting and Multimedia (4.7%) and Property (8.7%). Thus, the majority of their business are easy for an investor to understand as it's got something to do with our daily lives and very visible to us.
2. Consistent Operating History - Looking at their financial statements, SPH shows a consistent operating history, without any wild fluctuations.
3. Favourable Long Term Prospect - With little competition in their core business of Newspaper and Broadcasting (esp. after the merger with MediaWorks), prospect over the long term is still very favourable to SPH. There's however very little growth potential unless they venture overseas or expand into other synergistic business locally.

Conclusion - Overall, SPH meets most of the criteria (my selected sub-set) set out by Warren Buffett. There's also the added attraction of good dividend yield. The only negative is their lack of growth. This is evident if you look at their turnover over the past 5 years which peaked at S$1Bil in '01 and has been in the range of S$800M-S$900M+ since. That is possibly also the reason why SPH pays out the bulk of their earnings as dividends ie. they have no better use for the monies to expand their business.

SPH will likely be able to sustain their earnings and pay out good dividends. However, it is doubtful that SPH share price will rise very fast unless they shows better growth potential. Any potential surge in share price will likely be due to their divestment of non-core business (eg. properties). SPH have however recently acquired some stakes in publishing cos. in Thailand, so let's see what the impact is over the next few Quarters. Currently, it looks more like a cash cow being slowly milked till it's dry :D

My Action - To continue to accumulate SPH on price weakness. I am already vested in SPH, which forms 25% of my porftfolio of local stocks. My last purchase is $4.38 in May and target next purchase at $4.28. SPH recently hit a low of $4.22 before recovering to close at $4.36 on 24-Jun. This could be due to mid-year window dressing by fund mgrs. Go here for chart for reference if you believe in Technical Analysis (TA) in timing your purchase.

Disclaimer : Use the above at your own risk! We'll not be responsible for any losses incurred but you can give us credit if you make money :D

# posted by Anonymous @ 6/25/2005 09:51:00 PM