SINGAPORE PRESS HLDGS LTD
SPH
T39.SI
Singapore Press Holdings (SPH SP) FY15: Running A Tight Ship
- Newspaper advertising revenue contracted 8.7% yoy in FY15 (4QFY15: -8.4% yoy), vs 7.3% in FY14.
- Lower media revenue was offset 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 4.7-5.0% remain decent.
- Maintain HOLD on SPH. Target price: S$4.10. Entry price: S$3.80.
RESULTS
Excluding one-offs, FY15 net profit rose 7.8%.
- Singapore Press Holdings (SPH) reported a net profit of S$322m for FY15, down 20.4% yoy. Results were 6.2% better than our forecast of S$303m. Core turnover fell 3.1% for the period. Excluding various impairments, a fair value derivative loss of S$37m and a fair value gain of S$36.3m (FY14: S$109m) on investment properties, full-year net profit improved 7.8% yoy from S$309m to S$333m. The gains arose mainly from an 11.7% reduction in materials, production and distribution costs, as well as a 12.6% increase in revenue from the property segment, which helped to offset declines in the media and others segments.
Newspaper advertising revenue remains weak.
- The media segment saw revenue fall 6.3% from S$963m to S$903m, in spite of SPH keeping its circulation rate flat vs FY14. Advertising revenue (AR) fell a further 1.3ppt to -8.7% for FY15 from -7.4% in FY14. AR contracted by 8.4% yoy in 4QFY15 (3QFY15: -9.0% yoy). AR is still weak. Management attributed this to advertisers' reluctance to spend due to the following factors:
- weak property and auto sectors,
- poor capital market conditions leading to fewer IPO-related adverts,
- poor retail outlook due to rising purchases through e-commerce, and
- lower tourist arrivals and hence, lower spending on luxury goods.
Material, production and distribution costs fell 11.7% in FY15.
- SPH reduced its cost base sharply primarily through cuts in its newsprint and material costs. Newsprint costs saw the largest reduction with a decline of 16.1% yoy, followed by other materials, production & distribution costs which fell 8.9%. Staff costs fell a meagre 0.8%, driven by reduced bonus costs.
A final DPS of 13 S cents has been declared.
- This brings the total DPS for FY15 to 20 S cents (5.0% yield), down from 21 S cents in FY14. We had expected a lower DPS but the final DPS of 13 S cents is better than our projection of 12 S cents.
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 cost control and new business 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 introduce our FY18 earnings forecast of S$323m. We tweak our FY16/17 earnings marginally by 0.1-1.3% to S$304m and S$314m on lower costs and higher investment income. Weak AR remains a key risk.
VALUATION/RECOMMENDATION
- Maintain HOLD with higher target price of S$4.10. We tweak our target price to S$4.10 (previously S$4.00), as the redemption of their S$600m MTN lowered our SOTP debt by 22.3%.
- Our recommended entry price is S$3.80 and below.
SHARE PRICE CATALYST
Share price catalysts are lacking.
- Traditionally, the share price has had a good correlation with AR growth and hence, our monthly page-counts.
Nancy Wei
UOB Kay Hian
|
http://research.uobkayhian.com/
2015-10-02
UOB Kay Hian
SGX Stock
Analyst Report
4.10
Up
4.00
