Singapore Press Holdings - OCBC Investment 2016-10-17: Dividends lowered as ad headwinds weigh

Singapore Press Holdings - OCBC Investment 2016-10-17: Dividends lowered as ad headwinds weigh SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings - Dividends lowered as ad headwinds weigh

  • FY16 numbers in line.
  • Final dividends of 11 cents.
  • Ad outlook remains difficult.

Announced final dividends of 11.0 S-cents 

  • SPH reported that its FY16 PATMI (for fiscal year ended 31 Aug 2016) declined 17.5% to S$265.3m mostly due to weaker contributions from the media business and lower fair value gains from investment properties held. 
  • In terms of the top-line for the year, we similarly saw a 4.5% dip to S$1,124.3m mainly because of weaker advertisement and circulation revenues, partially offset by stronger numbers from the group’s property and other businesses. 
  • Overall, we judge these results to be broadly within expectations. The group proposed a final dividend of 11.0 S-cents per share, bringing the total payment for the year to 18.0 S-cents (versus 20.0 S-cents last year) – also in line with our expectations.

Ad market remains weak 

  • The group continues to see falling ad demand over the latest quarter. Total newspaper ad revenues dipped 12.5% YoY in 4QFY16 as classified and display figures both declined 14.4% and 8.6% YoY, respectively. 
  • On the bright side, management’s focus on cost management and operating efficiency has proved to be fairly successful as total costs declined for a third consecutive year. 
  • Excluding impairment charges, we note that operating expenditure fell S$22.6m or 2.7% YoY. Staff costs have also been held in check with headcount and expenditure decreasing 1.3% and 2.4% respectively.

Management expects challenging conditions ahead 

  • Looking ahead to FY17, management expects conditions to remain difficult given the uncertain economic outlook and the continuing disruption of the media industry. 
  • Over the last quarter, SPH began a comprehensive review of its core media business with the twin goals of sustaining the media business and pursuing growth opportunities. 
  • While headwinds from media business will pose significant challenges ahead, its property portfolio will buttress earnings to an extent – FY16 net property income grew 3.1% to S$179.4m and there were improved performances at all three malls. 
  • That said, we maintain our SELL rating on the stock on valuation grounds here with an unchanged fair value estimate of S$3.41.

Carmen Lee CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-10-17
OCBC Investment SGX Stock Analyst Report SELL Maintain SELL 3.41 Same 3.410