Singapore Press Holdings SPH - CIMB Research 2016-01-13: Slight beat on one-offs

Singapore Press Holdings SPH - CIMB Research 2016-01-13: Slight beat on one-offs SINGAPORE PRESS HLDGS LTD SPH T39.SI 

Singapore Press Holdings - Slight beat on one-offs 

  • SPH’s 1QFY8/16 net profit of S$81.3m was slightly ahead of expectations at 31%/28% of our/consensus full-year forecast. 
  • The beat came from one-offs, including S$5.3m gain on sale of investments and write-back of contingent consideration; otherwise, earnings would have been in line. 
  • Media disappointed again, as revenue and PBT fell 9% and 21% yoy, respectively. We see no near-term respite for ad revenue amidst the weak macro environment. 
  • Property revenue was higher yoy due to contributions from The Seletar Mall starting 2QFY15. Paragon and Clementi Mall continued to see positive rental reversions. 
  • Maintain Reduce, with a lower SOP-based target price of S$3.61 after adjusting for a lower valuation for SPH REIT and slight EPS tweaks. 

■ Core operating profit in line; net profit boosted by one-offs 

  • SPH reported 1QFY8/16 core operating profit of S$99.0m (-3.3% yoy), which was broadly in line with our expectation. 
  • Operating expenses were kept in check, keeping operating margin broadly unchanged at 33.4% (1QFY15: 33.3%). 
  • Net profit of S$81.3m (+17.3% yoy), however, was a slight beat to our expectations. This was due to: 
    1. a S$5.3m gain on sale of investments, and 
    2. a write-back of contingent consideration for an acquired business, as profit targets were not met. 

■ Advertisements continue to be a drag on the media business 

  • Media revenue fell 8.7% yoy to S$223m in 1QFY16, dragged down almost solely by an S$20m fall in ad revenue (-10.6% yoy). Display ads saw an especially sharp decline of 12.5% yoy (FY15: -7.9% yoy), while classified ads saw a slight improvement to -10.3% yoy (FY15: -10.5% yoy). The lower revenue was partly mitigated by a 15.3% yoy fall in newsprint cost, but media PBT still fell 21% yoy to S$63m on lower operating leverage. 

■ Property fared better on contributions from The Seletar Mall 

  • Property continues to be the bright spot, with revenue expanding 16% yoy on the back of contributions from The Seletar Mall, which started operations in 2QFY15. 
  • Property PBT expanded by 16% yoy as well, with PBT margins fairly constant at 62.5% (1QFY15: 62.7%). Paragon and Clementi Mall both continued to see positive rental reversions of 3.2% and 5.4%, respectively, even amidst a challenging retail environment. 

■ 5.2% yield amidst recent sell down, but dividends remain at risk 

  • SPH’s dividend yield increased to 5.2% (4.75% in Oct) with the recent market sell down. However, we think that its dividends continue to be at risk, given the earnings pressure in the media segment due to a weak macro environment. 
  • We expect DPS to be cut by 1 Sct per year to 19 Scts in FY16 and 18 Scts in FY17 vs. consensus expectations that DPS will be maintained at FY15’s 20 Scts for both years. 

■ Maintain Reduce 

  • We maintain our Reduce call on SPH, as we see no near-term respite for the media business amidst weak sentiment. 
  • Our SOP-based target price falls to S$3.61 after we make slight EPS tweaks, and as we value its 70% stake in SPH REIT at the current market price of S$0.92/share (previously based on target price of S$1.05/share).

Jessalynn CHEN CIMB Securities | http://research.itradecimb.com/ 2016-01-13
CIMB Securities SGX Stock Analyst Report REDUCE Maintain REDUCE 3.61 Down 3.61