SPH Singapore Press Holdings - OCBC Research 2016-01-13: Cost-side discipline bearing fruit

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: Cost-side discipline bearing fruit 

 1QFY16 PATMI up 17.3% YoY 
 Boost from investment income 
 Cost-side discipline bearing fruit 

1QFY16 results boosted by investment income 

  • Singapore Press Holdings (SPH) reported a 1QFY16 PATMI of S$81.3m, up 17.3% YoY, mostly due to a dramatic jump in net income from investments (which rose to S$10.3m from S$1.7m in 1QFY15), improved share of results of associates and JVs, and lower cost of operations over the quarter. 
  • We understand that the YoY improvement in investment income was mainly due to the absence of a fair value loss on forward hedges booked in 1QFY15. 
  • In terms of the topline, however, we saw 1QFY16 revenues dip 3.5% YoY to S$296.2m; this was mainly attributable to lower contributions from the media business (down 8.7% to S$223.0m) but partially offset by higher contributions from the property business (up 16.0% YoY to S$59.7m) and other business segments (up 20.2% to S$13.5m). 
  • Operating profit for the quarter similarly decreased 3.3% YoY to S$99.0m due to higher expenses from business promotion, event costs and debt provisions. 
  • Overall, we judge the quarter’s results to be broadly within expectations; 1QFY16 operating profit now constitutes 27.3% of our full year forecast. 

Focus on cost management bearing fruit 

  • The downtrend for total newspaper ad revenues remained intact in 1QFY16, falling 11.9% YoY while display and classified ads similarly fell 12.5% and 10.3%, respectively. 
  • We continue to see management’s focus on costs bearing fruit, with total costs lower by 1.2% YoY. As as end Nov15, the headcount of the group decreased from 4,317 to 4,273 while total staff costs similarly decreased from S$92.9m to S$92.1m. 
  • Average monthly consumption of newsprint also fell 3.2% to 7,366mt per month. 
  • On the property side, net property income grew 21.1% YoY to S$44.8m, boosted by contributions from the fully leased Seletar Mall which began operations in Nov 14. 
  • Contributions from the Paragon and The Clementi Mall remained stable. 
  • Maintain HOLD with an unchanged fair value estimate of S$3.78. 

Carmen Lee CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-01-13
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 3.78 Same 3.78