ST : SPH's property earnings serve as 'buffer'

Dec 5, 2009

SPH's property earnings serve as 'buffer'

Real estate and other interests guard against ups and downs of media business, says CEO

By Fiona Chan

MEDIA group Singapore Press Holdings (SPH) will continue to pursue opportunities in real estate as a way to guard against the ups and downs of the media business.

Chief executive Alan Chan yesterday defended SPH's property investments at the company's annual general meeting.

He was responding to questions from shareholders about why SPH, which derives 85 per cent of its profits from its print business, is dabbling in property.

The company owns the upmarket Paragon mall in Orchard Road and is developing the Sky@Eleven condominium in Thomson Road, which is expected to be completed next year. Last month, SPH also teamed up with NTUC FairPrice and NTUC Income to buy Clementi Mall.

'We are looking at all kinds of businesses to buffer any ups and downs of the media business,' Mr Chan told about 500 shareholders at the SPH News Centre auditorium yesterday morning.

'We want to bill ourselves as a company with as many advertising platforms as possible, and we will also be harnessing our skills in property to enhance shareholder value.'

Hit by the downturn this year, SPH's core newspaper and magazines business lost 12 per cent in revenues for the year ended Aug 31. But a surge in property revenues from the Sky@Eleven condominium this year meant that overall revenue held steady.

'Sky@Eleven's contribution helped us maintain our profitability, and therefore our ability to pay 25 cents to the shareholders,' Mr Chan said, referring to SPH's full-year dividend this year of 25 cents per share.

Similarly, profits from Paragon have helped to offset losses on the print side of things, he said. SPH's property segment turned in $242 million in pre-tax profits this year, a jump from last year's $162.8 million.

Mr Chan recalled that when he joined SPH in 2002, 'everyone was pushing me to sell Paragon'. Back then, the mall was valued at $1 billion; today, that figure has risen to $1.95 billion.

'If I had sold Paragon in 2003 as per the wishes of certain shareholders, I don't think we would be seeing that 25-cent dividend today.'

SPH chairman Tony Tan reassured shareholders that the company's property investments would be selected with great care.

'We see the property segment as being a very valuable part of SPH in the coming years, but we have to develop our property interests carefully, without straining our balance sheet,' he said.

'That's why we've been very careful not to over-extend ourselves and to embark on initiatives only when we are confident that we have financing and where it will add substantially, in due course, to SPH's revenue and profits.'

Shareholders also queried SPH's bullish bid of $541.9 million for Clementi Mall, which was about 42 per cent above the next highest offer. One shareholder commented that the bid reflected SPH's 'eagerness and lack of experience'.

In response, Mr Chan said that the bid price was a 'combined decision' by all three partners. SPH owns 60 per cent of the mall, with the rest held by NTUC FairPrice and NTUC Income, which have more extensive property and investment experience, he added.

SPH is also continuing to invest in its print business, said Dr Tan. Despite the financial meltdown this year, the company revamped several products, including the website straitstimes.com and Her World magazine, and launched new products such as bilingual monthly ZbBz.

Next year, SPH is hoping to tap the advertising potential of the upcoming integrated resorts and the resulting buzz in the country, Mr Chan said.

On the flip side, he said, newsprint costs may rise as newsprint mills shut down, given that many newspaper companies in America and Europe have folded. But the weak United States dollar may help to offset some of these rising costs as the price of newsprint is denominated in US dollars.

fiochan@sph.com.sg


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ENHANCING SHAREHOLDER VALUE

'We want to bill ourselves as a company with as many advertising platforms as possible, and we will also be harnessing our skills in property to enhance shareholder value.'

SPH chief executive Alan Chan

CAREFUL IN SELECTING INVESTMENTS

'We've been very careful not to over-extend ourselves and to embark on initiatives only when we are confident that we have financing and where it will add substantially, in due course, to SPH's revenue and profits.'

SPH chairman Tony Tan