Singapore Press Holdings - Underwhelming start to the year
- Weak earnings within expectations.
- Ad outlook remains soft.
- Continued focus on cost discipline.
1QFY17 PATMI down 44% YoY
- Singapore Press Holdings (SPH)’s 1QFY17 PATMI declined 43.8% to S$45.7m mostly due to a S$15.9m charge arising from the media business review and impairment of an associate, and a decline of S$12.6m in profits from the media business.
- We also saw a S$1.8m net loss from investments over the quarter due to fair value losses on forward hedges for portfolio investments, versus a net gain of S$10.3m in the same quarter last year. In terms of the topline, group revenues in 1QFY17 similarly fell 6.0% YoY to S$278.3m due to the impact from a slowing economy and ongoing disruption of the media industry.
- Revenue contributions from the group’s key media segment dipped 9.5% YoY in the latest quarter as advertisement revenues decreased 13.5%.
- While this quarter’s earnings were fairly weak, they came in mostly within our expectations and 1QFY17 PATMI now constitutes 20.0% of our full year forecast.
No respite for ailing ad business
- Ad demand continued its decline over the latest quarter. Total newspaper ad revenues dipped 15.0% YoY in 1QFY17 as classified and display figures both declined 16.0% and 12.5% YoY, respectively.
- Circulation revenues, however, increased 1.8% YoY as the group increased newspaper cover prices in March last year.
- The management team has been focused on cost management and, excluding the one-time S$15.9m charge this quarter, the group’s operating expenditure fell 5.2% YoY and we understand that SPH will be implementing wage restraint measures in 2017 to further contain costs.
Maintain SELL with S$3.41 FV estimate
- On the brighter side, SPH’s property segment continues to show resilience with revenue contributions up 1.3% YoY to S$60.5m.
- Given the uncertain economic outlook and the continuing disruption of the media industry, we expect conditions to remain challenging for the group’s media business ahead.
- Maintain SELL on the stock on valuation grounds with an unchanged fair value estimate of S$3.41.