This article was first published on Tom K's blog, and is reproduced with permission
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Global 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 $3.7m increase in revenue from GYP's share of results of associated companies, the total revenue of GYP in FY2014 would have been lower.
The increase in revenue from GYP's share of results of associated companies could have come from its investment in CallmyName Registry as well as Yamada Green Resources (two companies which GYP invested in FY2014) and from the divestment of some of its other associated companies.
I am more interested in the performance of GYP from its five business segments.
Revenue (S$)
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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.
5. Last but not least, revenue from Singapore river tour and taxi services increased 425% and grew from a sector contributing 2.6% of GYP's revenue to almost 15.4%. Of all the segments, this one is the most interesting to me as this is one of the "non-core" investments which GYP has diversified into.
Looking at the results from FY2013 to FY2014, I think this segment is quite promising and it may indicate that the diversification strategy of GYP is paying dividends though I must also mention that river tour and taxi services may be a cyclical business as it depends mainly on tourists.
GYP's bumboat river tour services 13 landing points along its route, and passes major tourist attractions that include Clarke Quay, the Raffles Landing Site, the Merlion, Marina Bay Sands and the Singapore Flyer. Photo: Company
In summary, the two main revenue drivers of GYP (sale of advertising space and the provision of call centre related services) have declined, hence I think GYP needs to work on these two drivers.
There is good growth in the provision of advertising and IT related services and I think GYP should continue to grow this revenue pie. And as we can see, the revenue from sale of directories has the smallest share of GYP's revenue pie while diversification strategies of GYP have produced results in theSingaporeriver tour and taxi services.
On this last note, I believe in GYP's diversification strategy to grow its revenue pie though I personally think that defensive businesses should be favored.
In terms of cash-flow, GYP had positive cashflows in FY2013 and FY2014 and the stock is currently trading at 0.546 (price to book) and around 11.2 (price to earnings).
The current stock price of GYP seems to me to be a good entry point to gain exposure into a company trading at good valuations, below book value and is transforming via its diversification strategies into a possibly exciting company.
Recent story: YAMADA GREEN RESOURCES: Buying by GYP and independent director
