Singapore Press Holdings (SPH SP) - UOB Kay Hian 2017-12-05: 1QFY18 Ad Count Decline Of 14% Heralds Further Weakness Ahead

Singapore Press Holdings (SPH SP) - UOB Kay Hian 2017-12-05: 1QFY18 Ad Count Decline Of 14% Heralds Further Weakness Ahead SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings (SPH SP) - 1QFY18 Ad Count Decline Of 14% Heralds Further Weakness Ahead

  • Our page count of SPH showed a 14% yoy decline for total ads. Double-digit declines were noted for all three segments. 
  • With 1Q setting the tone for page counts for the year, a recovery in print revenue seems unlikely. Our current assumption for a 10% yoy decline in FY18 remains intact. Earnings estimates remain unchanged.
  • Revise target price up to S$2.42 as we incorporate MindChamps. Maintain SELL.



WHAT’S NEW


Advertising downtrend worsened in 1QFY18. 

  • Based on our page count, Singapore Press Holdings (SPH) saw its page count decline by 14% yoy for 1QFY18. This is the sharpest decline ever seen for 1Q, which has historically been one of its stronger quarters, and was comparable to the weakness seen in 3QFY17.

Double-digit declines across all segments. 

  • Sharp drops in advertising were seen across all segments, with the Classifieds reporting the sharpest yoy decline. By segment, the Recruit, Classified and Display segments saw yoy declines of 15%, 22% and 11% respectively.


STOCK IMPACT


1Q statistics portend grim outlook for FY18. 

  • 1Q typically sets the tone for SPH’s page count for the rest of the year. While 3Q has historically been the strongest quarter, the variance against 1Q has been around 1%. As such, the double-digit drop in page count potentially points to a sharper-than-expected decline in Media revenue for FY18.

Current estimate of 10% yoy decline for print revenue in line for now. 

  • With 1Q typically making up 26% of SPH’s page count, annualising the figure points to a full-year page count decline of 11% yoy. 
  • Barring a mid-year recovery/worsening in the segment, our current assumption for a 10% yoy decline in FY18 seems on track.


EARNINGS REVISION/RISK


No changes to estimates. 

  • We have made no changes to our earnings estimate, given that current data points show our assumptions to be on track. However, should the coming quarters’ page count show an acceleration in page count decline, our current FY18 estimates of S$210m will likely be revised down by 8%. 
  • Our forward dividend yield will fall from 4.7% to 4.3%.


VALUATION/RECOMMENDATION


Maintain SELL and tweak target price to S$2.42. 

  • Our SOTP target price is raised to S$2.42 as we incorporate MindChamps into our valuations. 
  • A 10% discount has been applied owing to the uncertainty of its future dividend payout. 
  • Downside risk against consensus dividend payout exists, as 4-5 S cents of current estimates for a 13 S cents payout in FY18 will likely have to arise from divestment gains of at least S$100m. 
  • Maintain SELL.







Foo Zhiwei UOB Kay Hian | Andrew Chow CFA UOB Kay Hian | http://research.uobkayhian.com/ 2017-12-05
UOB Kay Hian SGX Stock Analyst Report SELL Maintain SELL 2.42 Up 2.380



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