(15-04-2013, 05:24 PM)KopiKat Wrote: [ -> ] (15-04-2013, 03:19 PM)Ben Wrote: [ -> ]It is fair to expect losses in the short term, due to numbers of factors, but ultimately these businesses should be profitable, which is why they want to buy in the first place. Besides, these online businesses, if left on its own, are growing and profitable, so why should it not be the case when it is run by SPH?
I have pondered on this Q before and this is what someone told me and I think it does make sense...
Before the online biz was acquired by SPH, the owners will run it on a very tight budget. Many sacrifices are made eg. Lower salary, cheap office + basic furnishings, maybe even own NB PC, HP, Transport,... etc. plus they can be on call or working at 24/7 without any compensation.
Expenses goes up tremendously (not just one-time expenses but also recurring ones) when SPH takes over. To retain staff, salary has to be adjusted to market rates plus many other benefits which now has to be paid for. Infrastructure will likely be upgraded to SPH standards as I doubt anyone will now be motivated to work in a place that looks like a dump...
So, hard to stay profitable unless Revenue increases a lot more...
You are mostly right. To add on, founders also rarely stay on in sph after their earnout period. So once founders leave, u can rest assure the business suffers further. Most online companies are so dynamic cuz of founders. But sgcarmart is a decent buy as a near monopoly in the online space.
(16-04-2013, 03:53 PM)CityFarmer Wrote: [ -> ] (16-04-2013, 03:25 PM)mobo Wrote: [ -> ] (16-04-2013, 01:05 PM)felixleong Wrote: [ -> ]sometimes I really dunno why SPH and singtel keep overpaying for online business that are making losses or are not so profitable
example sph's purchase of sgcarmart for 60mil
singtel's purchase of hungrygowhere for 12mil
I think at the end of the year its the young entrepreneurs that sold out that's laughing their way to the bank ^^
I suspect it is a direction from the top for them to model after venture capital modus operandi, i.e. buy as many promising start ups as you can and hope to strike that 1 or 2 correct ones to turn the overall portfolio profitable. These successful survivors can then be developed full fledged and integrated into the Group as a future growth driver.
Two main problems with this approach though:
1) The guys who are running the VC show (Allen Lew / Alan Chan and their Board of Directors) are typical corporate managers cum bureaucrats. Their experience, character and business expertise is very different from VC fund managers.
2) Because this VC thing is more like an offshoot adventure of an established cash cow business, they are serverly restricted in the type of companies they can pursue, i.e. it must be from industry adjacencies and able to "synergize" with the existing Group. This curtails much of the flexibility and competitive edge enjoyed by other VC funds.
IMO, SPH does not follow the approach of VC. VC invests in start-up while it is still cheap, rather than already successful one e.g. sgcarmart which costs tenth of million.
SG carmart is a startup by corporate standards and $60mil is considered small enterprise by Singapore standards I think. Many silicon valley startups are well capitalised in the region of tens of millions as well.
If you look at the life cycle of a typical business, SG carmart is still in its infantile stage. There is much more potential than what it is now, a simple website providing car-related info to Singapore users.
Whether it will be able to fulfil its potential is another different story, I'm very sceptical though, knowing the profile of SPH's senior management team and the way their BOD thinks.
According to Newspaper Association of America and this article, newspaper is a dying industry on verge of extinction in USA.
http://www.aei-ideas.org/2013/04/free-fa...n-in-1950/
In summary, the dramatic decline in newspaper ad revenues has to be one of the most significant Schumpeterian gales of creative destruction in recent years. And it’s not over. One recent special report from IBISWorld on “Dying Industries” identified newspaper publishing as one of ten industries that may be on the verge of extinction in the United States.
http://www.ibisworld.com/Common/MediaCen...stries.pdf
(17-04-2013, 09:50 AM)mobo Wrote: [ -> ] (16-04-2013, 03:53 PM)CityFarmer Wrote: [ -> ] (16-04-2013, 03:25 PM)mobo Wrote: [ -> ] (16-04-2013, 01:05 PM)felixleong Wrote: [ -> ]sometimes I really dunno why SPH and singtel keep overpaying for online business that are making losses or are not so profitable
example sph's purchase of sgcarmart for 60mil
singtel's purchase of hungrygowhere for 12mil
I think at the end of the year its the young entrepreneurs that sold out that's laughing their way to the bank ^^
I suspect it is a direction from the top for them to model after venture capital modus operandi, i.e. buy as many promising start ups as you can and hope to strike that 1 or 2 correct ones to turn the overall portfolio profitable. These successful survivors can then be developed full fledged and integrated into the Group as a future growth driver.
Two main problems with this approach though:
1) The guys who are running the VC show (Allen Lew / Alan Chan and their Board of Directors) are typical corporate managers cum bureaucrats. Their experience, character and business expertise is very different from VC fund managers.
2) Because this VC thing is more like an offshoot adventure of an established cash cow business, they are serverly restricted in the type of companies they can pursue, i.e. it must be from industry adjacencies and able to "synergize" with the existing Group. This curtails much of the flexibility and competitive edge enjoyed by other VC funds.
IMO, SPH does not follow the approach of VC. VC invests in start-up while it is still cheap, rather than already successful one e.g. sgcarmart which costs tenth of million.
SG carmart is a startup by corporate standards and $60mil is considered small enterprise by Singapore standards I think. Many silicon valley startups are well capitalised in the region of tens of millions as well.
If you look at the life cycle of a typical business, SG carmart is still in its infantile stage. There is much more potential than what it is now, a simple website providing car-related info to Singapore users.
Whether it will be able to fulfil its potential is another different story, I'm very sceptical though, knowing the profile of SPH's senior management team and the way their BOD thinks.
VC provides seeding fund and/or growing fund, rather than funding an exit plan
IMO, SPH's investment of 60 mil seems providing an excellence exit plan for founders and investors. A good alternative of an IPO.
From the recent drop in SPH share price, the institutional investors do not like SPH management's recent results announcement and investments.
Whether these investments are yield accreditive, only time will tell. I agree felixleong that its the young entrepreneurs that sold out that's laughing their way to the bank for now.
Base on most updated 17 analysts' report rating
Buy rating: 2
Outperform: 3
Hold: 6
UnderPerform: 1
Sell: 5
Consensus TP: $4.234, and rating Hold.
The current price is around $4.23, pretty close to consensus TP.
I just saw something interesting and went to check for more info online...
There's this new 'Buzz' unit operating under a block of HDB flats, very much like our neighbourhood 7-11 stores. AFAIK, 'Buzz' was operated by SPH and I'd previously noticed it at some of the bigger Bus Stops to sell mainly Newspapers & Magazines plus some sweets & tissue packs...
What a surprise for me when I checked 'Buzz'
website...
They're not just at Bus Stops, Bus Interchange & MRT/LRT Stations but also Shopping Malls & Others. See the
list of their locations. According to
AR2012, there're 68 of them! Some of them are likely franchises as I see them advertising on
Franchise Opportunities.
So, the next Q I have is where are these reported under their financials? Looks like it's also under the very-crowded 'Others'? Not so clear from AR2012,
The Newspaper and Magazine segment is involved in the publishing, printing and distributing of newspapers and magazines. The Treasury and Investment segment manages the investment activities of the Group while the Property segment holds, manages and develops properties of the Group. Other operations under the Group, which are currently not significant to be reported separately, are included under “Others”. These comprise the Group’s businesses and investments in Internet and related activities, outdoor advertising, radio broadcasting, television broadcasting, organising conventions/conferences/events, book publishing and distribution, online investor relations services, developing applications and operating a financial portal.
More about 'Buzz' from AR2012,
SPH Buzz Pte Ltd, a wholly owned subsidiary of SPH which
operates an extensive retail network of 68 pods at major bus
interchanges, MRT stations and commercial sites, will further
widen its presence in the heartlands, town centres, and central
business districts. It opened its first 24-hour pod along Clementi
Road in March this year.
Perhaps a separate 'Retail' segment in the future....
24 hours just like 7-Eleven. Everyone is going into the franchise model. SPH with 68 pods islandwide is still a small player as compared to 7-Eleven and Cheers.