Advertising Revenue Contraction Appears To Be Tapering Off
- SPH’s advertising revenue contraction appears to be tapering off. Our page monitor of The Straits Times points to an adspend contraction of 2% yoy in 3QFY15 (2QFY15: Reported -9% yoy).
- While we do not see any near-term share price catalysts, the annual dividend yield of 4.4% remains decent.
- Maintain HOLD. Target price: S$4.20. Entry price: S$4.00 and below.
WHAT’S NEW
- Advertising revenue contraction is tapering off. Singapore Press Holdings’ (SPH) advertising revenue (AR) contraction appears to be tapering off.
- Our monthly page monitor of The Straits Times suggests advertising spending (adspend) contracted by 2% yoy in 3QFY15 (Feb-May 15) vs a reported advertising revenue contraction 9% yoy in 2QFY15. This contraction is less than 1QFY15’s -9% yoy.
- SPH had earlier attributed 2QFY15’s weak AR to advertisers’ reluctance to step up spending in view of:
- a) weak domestic spending given the locals’ high propensity to travel and spend overseas and ecommerce,
- b) lower PRC arrivals and thus consumer spending on luxury goods, and
- c) lower Indonesian and Malaysian arrivals. Tourist arrivals contracted by 4% yoy in 2QFY15.
- We are maintaining our projected AR contraction of 3% for FY15.
STOCK IMPACT
Flat share price but dividend yield is decent.
- SPH’s print revenue is expected to perform in tandem with Singapore’s muted GDP growth which is projected at 3.3% for 2015.
- Traditionally, the share price has had a good correlation with domestic economic growth. The share price is expected to be flat, but annual dividend yields of 4.4% for FY15-17 are decent amid a low interest-rate environment.
Focus is on property initiatives.
- As the media business remains a mature business, we expect SPH to rein in costs and intensify its search for new business initiatives.
- Seletar Mall – a 70:30 JV between SPH and United Engineers – obtained Temporary Occupation Permit (TOP) on 28 Oct 14 and opened its doors to shoppers on 28 Nov 14. The fourstorey family-oriented mall houses more than 130 brands and has a diverse mix of anchor tenants including premium supermarket FairPrice Finest, cineplex Shaw Theatres, food court Foodfare, Japanese casual clothing company UNIQLO, ladies-only fitness centre Amore Fitness & Boutique Spa and department store BHG.
- Given that the media business remains as a mature business, we expect SPH to rein in costs and intensify its search for new business initiatives.
EARNINGS REVISION/RISK
- No change in our earnings forecasts.
- Weak AR remains as a key risk.
VALUATION/RECOMMENDATION
- Maintain HOLD. Our target price of S$4.20 is based on a SOTP valuation.
- Our recommended entry price is S$4.00 and below.
SHARE PRICE CATALYST
- Share price catalysts are lacking.
- Traditionally, the share price has had a good correlation to advertising revenue growth and hence, our monthly page-counts.
Source: http://research.uobkayhian.com/
