Singapore Press Holdings SPH - UOB Kay Hian 2015-10-14: FY15 Running A Tight Ship

Singapore Press Holdings SPH - UOB Kay Hian 2015-10-14: FY15 Running A Tight Ship 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: 
    1. weak property and auto sectors, 
    2. poor capital market conditions leading to fewer IPO-related adverts, 
    3. poor retail outlook due to rising purchases through e-commerce, and 
    4. 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 HOLD Maintain HOLD 4.10 Up 4.00


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