Singapore's press giant shares the good news
Jake van der Kamp
An interesting piece of news out of Singapore is that Singapore Press Holdings (SPH) has given up trying to find a use for its hoard of cash and is paying the money back to shareholders.
As of May, SPH had an estimated S$527 million (about HK$2.4 billion) in holdings of cash and cash equivalents, and analysts estimate this could still go as high as $700 million by the end of the year. This compares with total shareholders' funds of about $1.25 billion at the moment.
It is now to pay out $496 million, or $1.22 per share, to its shareholders and also to engage in a somewhat complicated stock restructuring that will reduce its share capital by 10 per cent.
SPH is not the only company in Singapore or Malaysia, now or at some time in the past, which has sat on a pile of cash and not known what to do with it.
Cerebos in Singapore is another example and Rothmans in Malaysia faced the conundrum for years.
It says something about investment prospects when private and public-sector officials talk up a country's economic opportunities over many years but the companies with the cash do not want to put any money into those opportunities.
It also says something about the nature of companies that have a secure cash flow and do not have to be all that entrepreneurial to keep earnings growing.
SPH has a virtual monopoly on the English-language press in Singapore while Cerebos has carved itself a secure market niche in Brand's Essence of Chicken, a purported stimulant recommended to men, and Rothmans is, of course, a name in cigarettes, a very secure business.
The phenomenon of directors sitting on a secure income, chewing their fingernails down in deliberations about where to put their money and deciding year after year to leave it with a bank for interest income is not something one commonly sees in Hong Kong.
It is some evidence that people in Hong Kong are simply more entrepreneurial.
SPH has had it wrong for many years. If the cash holdings had been kept down to what the business reasonably requires and the difference invested, the company would almost certainly have grown to be a much larger one than it is now, even accepting that those investments would have lost a good deal of their value since last summer.
It calls into question whether the directors have the shareholders' interests uppermost in mind or are simply satisfied with providing an English-language newspaper of which the government approves.
However, having got it wrong in the past through timidity, the real question is whether SPH is a good contrary indicator in getting it wrong again. The company has no serious worry about its cash flow. Advertising revenue appears to be down but analysts are still talking about only single-digit declines in earnings. The big dividend would never have been announced otherwise.
But the dividend clearly signals that the directors are even more disinclined to put the money to real work than they ever have been before.
This comes at a time when almost everything in Singapore and Malaysia is being offered at true bargain-basement prices. Now would be an opportunity to show a little faith in economies that have always revived rapidly from their difficulties in the past despite news easily as bad as it is now.
There is no need to make adventurous investments. There are plenty of opportunities now available in companies with solid cash flows but facing liquidity restraints which have made them willing to give more of themselves away at low prices than has been conceivable for many years.
However, one of the most obvious sources for help sees no opportunity anywhere and has said it about as loudly and irrevocably as can ever be said.
It has to be one of those prized signals that tell you a market is near its bottom.
Yes, the news in Singapore is bad. It is Singapore's newspaper that says so. But it's in the price if it's in the press.