This article was first published on Tom K's blog, and is reproduced with permission
 


Global Yellow Pages ("GYP") is one of the stocks which I have been keeping tabs on. Reasons:


√ Firstly, GYP is in the traditional business of telephone directories and I am curious as to how GYP will align its business in the Internet age, especially when other traditional information companies like Singtel and Singpost have successfully revamped their business models.

√ Secondly, the low stock price of GYP at just slightly more than four cents a share appeals to me. I cannot help wondering whether the low price could be a base from which GYP would become a multi-bagger, especially when GYP has an established business.



GYP_chart12.14Global Yellow Pages closed at 4.3 cents for a trailing PE of 7.5X and a market cap of S$73 million. Chart: Bloomberg. To answer these questions, let’s look at the 2014 annual report of GYP.

True to my expectations, GYP has noted the limited market for its telephone directories business and it has since diversified its business offerings to include trade directories, database marketing, direct marketing, a calling app, e-commerce, a river taxi business as well as a stake in a mushroom producer, Yamada Green Resources. Also, GYP may be exploring the property business.

To see how these diversification moves could boost GYP's financial bottom-line, I compared the statements of income for FY2013 and FY2014.

After tax deductions, the net profit in FY2014 was $4.6 million compared with a negative $125m in FY2013. This is a great result and it can mean only one of these: either GYP's revenue for FY2014 increased or GYP's expenditure decreased, or both. 

Looking at the expenditure items, I see a significant improvement ($27.4m in FY2014 compared with $157m in FY2013) and the reduction  was due to the incurring of $125m for impairment of goodwill on business acquisition and consolidation as well as intangible assets in FY2013 which were not repeated for FY2014. 

Simply put, FY2013 expenditure was significantly higher due to one-off items. 

So how about GYP's revenue? It was almost unchanged year-on-year ($32.9 m in FY2014 vs $33.1m in FY2013). However, GYP's main revenue for FY2014 actually shrank from $30.1m in FY2013 to $27.2m in FY2014.

If it were not for the $3.7m increase in revenue from GYP's share of results of associated companies, the total revenue of GYP in FY2014 would have been lower.

The increase in revenue from GYP's share of results of associated companies could have come from its investment in CallmyName Registry as well as Yamada Green Resources (two companies which GYP invested in FY2014) and from the divestment of some of its other associated companies.

I am more interested in the performance of GYP from its five business segments. 

Revenue (S$) 

FY14

FY13

% change

Sale of advertising space

13.8m

19.4m

(28)

Call centre related services

6.7m

8m

(16.25)

Advertising and IT related services

2.4m

1.8m

33

Sale of directories

0.029m

0.15m

(80)

Singaporeriver tour and taxi services

4.2m

0.8m

425

Total

27.2

30.2

(9.9)


So what conclusions can we draw from the above?

1. The main bulk of the decline of GYP's main revenue has to do with the 28% decline from its main revenue driver (sale of advertising space). As the main contributor of GYP's main revenue (some 50% to 60%), I believe GYP should look at ways to prevent this revenue segment from going south further. 

2. Though the revenue from the sale of directories headed south by almost 80% year-on-year (due probably to the move to stop the publication of the White Pages Residential directory in line with the government's directives), this item contributed just a small percentage of GYP's main revenue in both years. This is quite surprising to me as I have always thought that this item may be GYP's main revenue as GYP is often associated with directories.

3. Revenue from call centre related services of GYP declined 16.25% year-on-year. As the second main contributor to GYP's revenue, I also believe GYP should tackle the decline in this segment.

4. What is encouraging is the revenue from the provision of advertising and IT related services increased by around 33%, and I hope GYP can continue to leverage on the opportunities presented by the digital era to grow this segment.


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