Corporate: SPH

Compiled by DBS Vickers

Story: Nielsen Media’s latest AdEx figures show that SPH’s newspaper display and classified ad volumes for July 2008 grew by 12.6% y-o-y. For SPH’s 11 months to
date for FY08 (September to July), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.9% yoy.

Point: We believe that these figures indicate that SPH is right on track to meet our assumption of 7% yoy growth in display and classified ad volumes for FY08, reflecting robust domestic consumption spending in Singapore thus far. Whilst growth in advertising revenue is expected to slow down, we remain positive on the Group’s longer-term prospects given its monopolistic position in print advertising, attractive property asset i.e. The Paragon and strong balance sheet. All these translate to firm, growing cash flows for SPH, which should help to continue to support the stock’s generous dividend payouts.

We expect SPH to reports its 4Q and FY08 results around mid-October and are projecting the Group to propose a final net dividend of 24cts (interim dividend was 8cts), given continued growth in its core publishing business, higher property rental income and further revenue recognition from the Sky@Eleven residential development.

Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of >7.5% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our sum of the parts valuation for SPH is S$5.75.

Sgbluechip says: There are often many positive reports on SPH, many stating its fair value above $5. However, for the past 3 years, it has never gone beyond $4.82. DBS Vickers is projecting a total dividend of 32 cents per share which is unrealistic as it is only projecting net EPS of 32 cents for FY 08, which is what SPH earned for FY 07.

I think the CFA analyst is overly optimistic!

It is unlikely SPH can surpass last year results due to poorer investment income so I am projecting its FY 08 EPS to be 29 cents.

Final dividend per share should be 16-18 cents per share due to the one tier tax system. In the worst case scenario, dividend per share should be 15 cents per share after tax. In the best case scenario, dividend per share will be 20 cents per share.

It is likely SPH will go up to $4.40 upon nearing of dividend payout date. There is 30 cents or 7% upside for this stock at last traded price of $4.11.

Hong Leong Finance: Time to buy?

I have been observing this stock for the past few months. It has low trading volume and erratic share price movements. It sometimes moves to above $3.50 or at times it will just lie at $3.40. Today it fell as low to $3.22. As I subscribe to income investing, I find Hong Leong Finance suiting very well to my risk appetite.

I picked up 3 lots today @ $3.40 using CPF OA.

I picked up another 3 lots @ $3.28 using cash.

The dividends for the past 4 years are as follows:

2004: 18 cents

2005: 33 cents

2006: 27 cents

2007: 26 cents

Average: 26 cents per annum

Trailing PE ratio is @ 11.2 at the price of $3.40.

I am projecting a modest 20 cents dividend for FY 08 which translates to roughly 6.1% yield (cash) and 5.9% yield (CPF).

HL Finance does not hold any CDOs or have no vested interest in Fannie Mae or Freddie Mac.

One thing to note is that it has only single digits ROE around the region of 8% on average. However, it has higher dividend yield than DBS, UOB and DBS.

Tomorrow is the last day to buy the stock to be entitled 5 cents dividends. It goes XD on Monday. I will pick up more if it falls further tomorrow.

Slow and steady now

Bloodbath. That would how many would describe the market. Few would expect the market to drop so quickly in a span of 2 weeks. Well, it is happening now. STI has breached the 2746 level and at a new low since Nov 2006.

For investors still holding on to cash, do not give the market a miss entirely. There are excellent blue chips out there at attractive valuations and dividend yields.

Invest in different market low points if you are not sure where the bottom is. Do not be afraid to sit on paper losses.

For me, I bought DBS @ $18.44 yesterday for its dividends. Though I am aware it will drop more than $0.20 after XD, I still couldn’t resist the lure of its dividend yield! True enough, it went to as low as $17.90 today.

The consolation is that I have locked in $200 dividends for Sept. Though it is too late to have regrets!

I have already contra my SPC for another modest $150 or so gain.

If the market dips even more tomorrow, I will pick up more blue chips and wait for a technical rebound. If not, I will also be happy to keep it for dividends and long term capital appreciation.

SGX and Capitaland will be on my radar tomorrow.

Foreigners: Boon or bane?

“I feel foreign in my own country.”

This sentence has been lamented by many Singaporeans recently. If you were to look at coffeeshop helpers, waitresses, students, teachers, bus drivers, sports athletes and neighbours around you, foreigners are everywhere.

Schooling pupils are feeling the heat of academic pressures from more competent foreign students.

University students often have to settle for 2nd class results as Asian scholars from China, Vietnam, India bagged all the As.

A friend who is working as a cook complained about low pay and long hours as his Malaysian colleagues work harder and longer hours for even lower pay. Employers prefer to employ them as they do not have to go for reservist as well!

A drive along Geylang showed that many steamboat shops have sprouted recently, majority being owned by China nationals.

Even Malaysian bus drivers from SBS face increasing competition from China bus drivers brought over to mitigate the shortage of bus drivers in Singapore.

I went to Ang Mo Kio S11 for dinner and I saw pretty China babes selling beer. It did occur to us (I was with friends) to buy beer and chat up with them, though we didn’t!

I have many new neighbours and colleagues from China as well. Many eventually gave up their China citizenship and become Singaporeans.

A friend from the education sector also confirmed that PRC teachers are employed from Primary school to university levels to teach Chinese. I believe this is true also, considering the small number of Singaporeans competent enough to teach Chinese when majority cannot even string a Chinese sentence properly without the aid of English.

So does this mean we should hate them?

I do understand the frustration of many Singaporeans who view foreigners, particularly PRCs in negative light because of their intrusion to our space, culture, jobs and perhaps even families. Many speak in their dialects in public areas in which though sounds familiar but even more irritating.

If you feel that way, I guess you are not alone.

However, from an investment perspective, the influx of migrants into Singapore is necessary for local businesses to increase revenue.
For instance, the Straits Times claims that it has been able to retain daily readership of 1.3m, comparable 10 years ago. Well, the percentage of readership has dropped at least by 30%, if they had indicated that our population was 3m in 1998, compared to 4m today.

I believe foreigners helped to sustain their readership numbers, together with their advertising revenue and share prices.

Our telcos also benefited from foreigners’ dollars. Starhub cable TV is likely to attract most PRCs, Hongkongers and Malaysians to subscribe to its service.

Pre paid cards, will go well with foreign students, maids and contract workers.

Overseas calls revenue has increased tremendously over the years for the same reasons.

Singpost has also benefited from the increased population. More mail volume has been generated from businesses to consumers over the years due to our trend of increasing foreigners’ population.

The rental market for property has been buoyant due to foreign students and workers too. This translates to better returns in the property counters for the past few years.

The list can go on, but really, a higher population should translate to higher revenue to businesses.

Take note that inflation will have to go up too. Should our “China-Singaporean” athletes win a gold medal in table-tennis tomorrow, they will have one million dollars to spend. All things remaining equal, it will create more demand for fewer goods, thus fuelling inflation here. If they decide to send their money back, selling Sing dollars for RMB, it will theoretically hasten depreciation of Sing dollars, again fuelling inflation of imported goods. The effects will of course be negligible, but if we are talking about all the foreigners in Singapore doing the same thing, I cannot say for sure if the effects will not considerable.

No, I am not against foreigners or anything. I know I don't sound convincing, but I am speaking from a neutral stand on foreigners. Honestly, the financial gains they bring to our personal investments are immeasurable. Since nothing can be done no matter how much we dislike them, might as well enjoy the financial returns they provide us?

I do hope they spend more here, buy more stocks here and improve our economy and pockets.

It does not make financial sense to be jealous that they can be one of us without going through NS or reservist; neither will it do any good to ostracize them as many are really capable.

I rather find it more worthwhile to face them, learn from them and if possible, make money from them! Hence, do look out for businesses that will be benefiting from these migrants!

More trading

I contra off my capitaland @ 4.95 and SPH @ 4.06 for a total modest gain of $190 yesterday. My gain from DBS (contra) was $190 earlier this month. It can get a tad addictive to glue my eyes on the computer screen while working. However, it does add just a bit of excitement in my working life!

Today I bought 2 lots of SPC @ $5.42 mainly for trading purposes. Again, if it falls badly tomorrow, I will not be cutting loss and will keep it till the next dividend payout.

SPC share price has been plunging due to crude oil prices. It doesn’t really make sense as it does not profit from high oil prices either. It is likely the fall in crude oil signals falling demand for oil refinery products as well.

In any case, the US markets and crude oil prices will dictate my realise gains or unrealised paper losses. I do suspect that many traders were shorting SPC shares today. Hence, there is a slight chance of a small rebound tomorrow where I can exit for a modest gain.

Readers are reminded that my trading will be limited to $9k-$12k contract value, as it has never been my intention to substitute trading for income investing. The stocks I shortlist for trading will also be blue chips, for liquidity and dividend reasons.

Singpost went XD today. I have secured $625 dividend payout receivable on 29th August.

Exit Interview Questions

Today I read with interest the kind of questions managers should ask their staff during their exit interviews (in Straits Times, Recruit).

Below are my frank answers:

1) What did you enjoy most about working here?

Ans: Not my colleagues, not my stakeholders, not my bosses. The only thing I enjoy is my often interrupted leave. It made me realised that a bad day at home is always better than the best day at work.

2) What did you enjoy least?

Ans: Working with kaisu, kiasi and cannot make it bosses. They are there to make sure they do not get fired and will go to great extend to cover their ass. I can only feel stupid working with such people. In fact, I have scolded a few superiors when they repeatedly cannot see my point and keep forcing me to do stupid silly work!

3) What comments or suggestions can you make to help our organisation grow stronger and more successful in the future?

Ans: Stop asking the majority of the staff to work on silly nitty gritty administrative work. We studied till postgraduate levels (90% of staff) not to be asked to do some silly work. Let us do our core work we had specialised in.

4) Do you feel we dealt with complaints and problems on the job in a timely and effective way? How could we have done better?

Ans: You have dealt with complains in the most patronising way. Your one and only strategy is to increase our pay and bonuses. You could have done it better by not doing anything at all. You only make things worse.

5) Did you have a clear picture of your specific career possibilities within our organization?

Ans: Yes. But I do not want to see myself become another Mr. Kiasi boss and force my colleagues to quit.

6) What one thing would have possibly made you re-think your decision to leave?

Ans: I have to start from scratch earning $2500 monthly after a career change. If I had stayed on to this job, I can comfortably retire upon reaching 50 (seeing most of my colleagues doing so, some even younger!). If I were to change my current job, I may regret and never retire!

It was then I realized that my current job is really unsuitable for me. In fact, I have been sharing with my close colleagues my intention to resign from my industry altogether. I would have resigned if not due to contactual obligations. Honestly, $2000 a month is more than enough to sustain my current lifestyle. Why do I have to slog so hard and live like a dog everyday? Sometimes work can be so stressful that I have insomnia at night. I come back home so drained that I cannot even summon strength to literally put food into my mouth. Many of my colleagues complained of the insomnia problems, sleeping only 2 hours daily. Some turn up for work with no sleep at all! Others end up spending large amount of money on sleep specialists, TCM (myself included) and other forms of treatments.

Is this the norm for Singaporeans? My teachers and parents told me then to study hard now, “suffer now than later in life”. Apparently they equate less education qualifications to more suffering. What kind of inverse relationship is that?!!

Or is there statistics to show that higher educated people are happier people?

Yet the happiest moments in my life was when I was in Secondary school, playing arcade and basketball, with only 50 cents for a can of Coke.

I shall look forward to tha day I have my freedom.

Random stocks at 52 weeks low

I am quite surprise to see some stocks trading at their 52 weeks low as at Friday’s closing price. I have used Share Junction to list down some stocks that are at their 52 weeks low (closing price). It is non exhaustive and may be inaccurate.

Allgreen: $0.895

Capitaland: $4.86

C&G Ind: $0.165

Starhub: $2.65

Pac Andes: $0.42

China Fish: $1.25 (also at all time low)

Cosco: $2.44

HK Land: US$3.76

Hongguo: $0.33

Kim Eng: $1.35

UOI: $3.39

Yangzijiang: $0.665 (also at all time low)

Almost 90% of SGX stocks are trading near their 52 weeks low.

Possibly a good signal to buy?