Singapore Press Holdings (SPH SP) 3QFY15: Shored Up By Property Earnings And Lower Media Costs
- Newspaper advertising revenue fell 9% yoy in 3QFY15, same as 2QFY15’s.
- Lower media revenue was partially mitigated by lower media costs, and higher property and investment income.
- We do not see any near-term share price catalysts, but projected annual dividend yields of 4.6-4.8% remain decent.
- Maintain HOLD. Target price: S$4.20. Entry price: S$4.00 and below.
RESULTS
Newspaper advertising revenue down 9% yoy in 3QFY15.
- Singapore Press Holdings (SPH) reported net profit of S$98.2m (+9.6% yoy) and S$237.2m (-8.7% yoy) for 3QFY15 (Mar-May) and 9MFY15 (Sep-May) respectively.
- 3QFY15 net profit was 22% or S$18m above our estimate of S$80m. The difference was due to investment income coming in S$9m higher than our estimate as well as lower-than-expected media costs.
Advertising revenue is still weak.
- Revenue from the media business declined 5.6% yoy to S$233.1m, primarily due to a 7.6% yoy fall in advertising revenue (AR).
- Newspaper AR declined 9.0% yoy in 3QFY15. Revenue from the property segment grew 16.5% yoy to S$59.4m due to contribution from The Seletar Mall which commenced business last November.
- SPH had earlier attributed its weak AR to advertisers’ reluctance to step up spending in view of:
- weak domestic spending given the locals’ high propensity to travel and spend overseas and e-commerce,
- lower Chinese arrivals and thus weaker consumer spending on luxury goods, and
- lower Indonesian and Malaysian arrivals.
Lower media costs mitigate lower media revenue.
- Media PBT declined 2.6% yoy to S$73.1m in 3QFY15. This was lower than the 5.6% yoy fall in media revenue because of lower staff and newsprint costs.
- Property PBT rose 19.4% yoy to S$37.7m while treasury and investment PBT climbed 17.2% yoy to S$23.4m.
STOCK IMPACT
Flat share price but dividend yield is decent.
- Share price is expected to be flat but annual dividend yields of 4.6-4.8% 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 continue to rein in costs and intensify its search for new business initiatives.
EARNINGS REVISION/RISK
- We raise our FY15-17 net profit forecasts by 5-7% on lower costs and higher investment income. Weak AR remains as a key risk.
VALUATION/RECOMMENDATION
- Maintain HOLD and target price of S$4.20 (based on SOTP). Our recommended entry price is S$4.00 and below.
SHARE PRICE CATALYST
- Share price catalysts are lacking. Traditionally, SPH’s share price has a good correlation to advertising revenue growth and hence, our monthly page-counts.
(Nancy Wei)
Source: http://research.uobkayhian.com/
