UOB Kay Hian Research 2015-07-10: Singapore Press Holdings (SPH) 3QFY15: Shored Up By Property Earnings And Lower Media Costs. Maintain HOLD.

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: 
    1. weak domestic spending given the locals’ high propensity to travel and spend overseas and e-commerce, 
    2. lower Chinese arrivals and thus weaker consumer spending on luxury goods, and 
    3. 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/




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