Background: Founded in 1924, Popular is in the business of book retail and distribution, publishing, and sale of e‐Learning products with a strong regional presence. The group has ventured into property development in Singapore since 2006 in order to maximise returns for shareholders.
Company outlook: Popular distinguishes itself in a sunset industry by setting up modern, upscale stationery concept shops such as {prologue} at Ion Orchard. In publishing, the company sees opportunities in the supplementary educational book segment in Singapore, Hong Kong, China and Canada. In the property segment, it has begun to recognise profit from the sale of units in its second project, 18 Shelford, and will recognise revenue from 8 Raja upon project completion in 2013.
Our view:
Resilient core book retailing business. Despite being in a sunset industry, Popular has seen revenue from its core retail and distribution and publishing businesses growing steadily at a CAGR of 7% over the past five years. These segments accounted for 92% of group revenue in FY Apr10.
Undervalued gem with downside protection. The steady organic growth in retail and distribution, as well as the resilience of the publishing business, seems to have gone unnoticed. The stock trades at 0.7x NTA and FY10 PER of just 3.6x against the peer average of 12x. The company is backed by $0.11/share in net cash and has a track record of high dividend payout. There is a high likelihood of more bumper dividends in the future as the company will recognise profit from its remaining two development projects over the next 3‐4 years (estimated $100m in revenue).
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