Singapore Press Holdings SPH - OCBC Research 2015-10-14: Lower one-time gains hits bottom-line

Singapore Press Holdings SPH - OCBC Research 2015-10-14: Lower one-time gains hits bottom-line SINGAPORE PRESS HLDGS LTD T39.SI 

Singapore Press Holdings: Lower one-time gains hits bottom-line 

 FY15 earnings hit by lack of one-time gains
 Ad market remains challenging
 Lower FV estimate to S$3.78

FY15 earnings hit by lower one-time gains 

  • Singapore Press Holdings (SPH) reported that its FY15 PATMI fell 20.4% to $S321.7m mostly due to lower fair value gains on investment properties and the absence of a S$52.9m divestment gain from the partial sale of 701Search to Telenor last year, which were partially offset by smaller losses from the group's share of results of associates/JVs in the current fiscal year. 
  • After squaring off one-time items, we judge these results to be marginally below expectations as FY15 operating profit comprises 88.3% of our full year forecast, with a steeper-than-anticipated dip in the media numbers being the key driver for the miss. 
  • In terms of the topline, FY15 revenues decreased 3.1% to S$1,177.1m due to lower contributions from the media business which dipped 6.3% (S$60.9m) to S$902.5m. This was partially offset by increased property income which increased 12.6% (S$25.8m). 
  • Also, due to considerable cost-side discipline, FY15 operating profit increased marginally by 1.3% (S$4.5m). A final dividend of 13 S-cents was recommended – 1 S-cent lower than last year’s. 

Unabated pressure on advertising revenues 

  • The advertising numbers continue to look uninspiring in 4QFY15, with total newspaper ad revenues falling 8.4% YoY. (Display and classifieds both fell 7.1% and 11.0%, respectively.) We understand from the group that they have been focused on managing the cost base and as a result, key cost-side items, including material and production costs, staff costs and other operating expenses all showed credible YoY declines. In particular, the cost of newsprint fell 16.1% while other materials, production and distribution costs fell 8.9%. 
  • From the real estate segment, FY15 net property income increased 17.3% with a maiden contribution from Seletar Mall; both the Paragon and The Clementi Mall also recorded higher rental income. 
  • We update our valuation model for softer assumptions for the media business and our fair value estimate dips to S$3.78 from S$3.85 previously. 
  • Maintain HOLD. 

Carmen Lee CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-10-14
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 3.78 Down 3.85