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

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

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.

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