AS a media firm that ventured beyond the comfort zone of publishing newspapers and magazines, Singapore Press Holdings Ltd (SPH) is something of a success story and a role model for peers looking to take the same path.

The company is one of Southeast Asia’s largest media organisations with extensive presence in print, online and on-air content.

SPH (fundamental: 1.60; valuation: 1.40) diversified into the property sector early in 1997. It purchased and refurbished Paragon into a premier, upscale retail mall in Singapore’s shopping belt, Orchard Road. The mall also houses Paragon Medical, which hosts over 60 medical and dental specialist clinics and offices.

SPH has not looked back since. The milestones include the launch of its maiden residential development Sky@eleven off Thompson Road in 2007 and the purchase of a second retail asset — a 60% stake in a mid-end suburban mall called The Clementi Mall — for S$541.9 million in 2009.

The company also started developing The Seletar Mall in 2012 and opened it to visitors last year. The six-storey building is located in the Sengkang estate, a growing residential estate in northeastern Singapore.

Besides that, among SPH’s notable properties are three plots of freehold land in Nassim Road in the heart of the city and its offices in Singapore.

The company’s success in its property endeavours can be seen in the changes in its balance sheet over the years. When it started, SPH’s property division was loss-making and contributed just 2.2% to the group’s revenue in the financial year ended Aug 31, 1998 (FY1998). The newspaper and magazine segment, on the other hand, remained its jewel in the crown, contributing almost all of the profit before tax of S$394.68 million for the year.

A decade later in FY2008, the property division represented close to a fifth of the group’s operating revenue — S$257.07 million out of a total of S$1.3 billion. The segment also recorded a PBT of S$162.83 million — 31% of the group’s PBT for the year.

At the same time, the newspaper and magazine segment saw its contribution moderate to $370.62 million or 71% of the group’s PBT of S$522 million.

By FY2014, though the once dominant newspaper and magazine business recorded operating revenue of S$939.7 million, its PBT had slipped to S$246.38 million or 46.6% of the group’s total of S$528.39 million.

The property segment, however, made up the difference. Its revenue was S$204.9 million but its contribution to the group’s PBT was almost equal to that of the newspaper and magazine division — S$239.38 million or 45% of the total.

Perhaps, the most telling sign of SPH’s wisdom in choosing to diversify into properties in a city where land in scarce and demand is almost boundless is the successful listing of SPH Real Estate Investment Trust (SPH REIT) in July 2013, which raised S$504 million.

SPH injected Paragon and The Clementi Mall into the REIT.

At the time of the listing, Paragon, which had undergone several facelifts, was valued at S$2.5 billion while The Clementi Mall was worth an estimated S$570.5 million. In its financial year ended Aug 31, 2014 (FY2014), the value of SPH REIT’s portfolio of properties had grown 3.4% to S$3.16 billion.

As at FY2014, SPH REIT (fundamental: NA; valuation: NA) saw a net property income of S$165.91 million and net income of S$125.36 million. Its total assets were worth S$3.27 billion and it had a net asset value per unit of 93 cents. The balance sheet indicated that the company was in strong financial health with S$90.7 million in cash and cash equivalents.

Investors were also assured that Paragon and The Clementi Mall enjoyed 100% occupancy and a healthy rental reversion rate of 10.5% and 5.5% respectively in FY2014.

SPH REIT distributed S$150.35 million to its unitholders, representing a return of 5.99 cents per unit. Based on its closing price of S$1.065 on Aug 29, 2014, SPH REIT had an annualised distribution yield of 5.08% in FY2014. Better still, compared with its initial public offering price of 90 cents a unit, it gave unitholders 6.01% in annualised distribution yield.

SPH, which is both the REIT’s sponsor and a 70% unitholder, has gained significantly from the listing of its two malls. But it does not stop there.

SPH REIT has the right of first refusal on SPH’s pipeline of income-producing properties located in Asia-Pacific. This means it is first in line to acquire the latter’s Seletar Mall, should it be divested.

Apart from the property sector, SPH has had equity interest in the out-of-home advertising business — via 80%-owned SPH MediaBoxOffice — since 2005. It dabbles in event management as well through wholly-owned subsidiary Sphere Exhibits, which it started in 2008. Today, Sphere Exhibits is among Singapore’s leading meetings, incentives, conferences and exhibitions (MICE) firms.

This article first appeared in The Edge Malaysia Weekly, on June 22 - 28, 2015.

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