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.

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.

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 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.

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.

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