Singapore Press Holdings (“SPH”) rallied by almost 10% in a single day on 26th Feb 2021 (Friday) when news of its investee e-commerce company, Coupang, is seeking an IPO worth US$50 billion dollars on the New York Stock Exchange was made known. SPH had invested US$3.9Mil in 2014 into Coupang. In 2015, Softbank also invested into Coupang and valued it then at US$5 billion. Based on this high-level analysis, this means that the valuation has increased by at least 10 times and SPH valuation of its investment stake in Coupang will grow from US$3.9Mil to a valuation of at least US$39Mil which is a cool gain of US$35 Mil in 7 years.
If we look at the recent announcement on 27th Feb 2021 which states that SPH stake in Coupang is approximately 0.1%, then this translates to a valuation of US$50Mil. This exceptional gain in 2021 is no doubt a material contribution to its upcoming financial performance however, this is actually a non-recurring financial gain. There is also no cashflow impact unless SPH intends to monetize its stake in Coupang after the listing.
New media law in Australia to get Google and Facebook to pay media companies
The whole world is watching how Australia is going to implement a world first legislation that will force Tech Giants- Google and Facebook- to pay for news publication. Under the proposed new law, called the News Media and Digital Platforms Mandatory Bargaining Code, Google and Facebook are required to negotiate licensing agreements with Australian publishers for the news articles that appear on Google search and Facebook's feed. Canada and Britain are watching closely and will be crafting up similar legislations in order to finance public journalism by local media companies which are all struggling with dwindling advertising dollars with more than 75% of the advertisement dollars now going into the pockets of Google and Facebook.
I have previously already mentioned in my previous post that such a move will benefit SPH greatly. Back then, I have mentioned either the Singapore government fund the media segment or follow the Australian innovative approach to level up the playing field. SPH is now still bleeding from its media segment business. With the new legislation being gradually adopted by every countries, SPH should at least break-even for its media segment. I am sure that our Singapore government is also closely observing the implementation in other countries and will eventually come up with its own legislation. This bodes well for SPH whereby its current property business is being used to unfairly subsidize the loss making media business.
Final thoughts
Many folks have prematurely dismissed SPH as an outdated business and that getting kicked out of the STI is the final nail in the coffin for SPH. However, SPH has already transformed itself into a real estate holding company. With the above fair value adjustment from its one-off gain in e-commerce investment as well as upcoming imminent change in media law, SPH business will still be relevant and at the same time, continue to contribute to local journalism. The share price of SPH has rallied strongly from a bottom low of S$0.990 per share in Nov'20 to close off at S$1.40 per share as at 26th Feb 2021.
P.S: Please also see my previous posting on SPH being over sold on 16th Oct'20 here:
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