SINGAPORE PRESS HLDGS LTD
T39.SI
SPH - Adspend continues to be lacklustre
- FY16 results within expectations.
- Adspend continues to be lacklustre.
- Full year DPS lower at 18 Scts.
- Outlook remains weak; maintain FULLY VALUED.
Maintain FULLY VALUED.
- We maintain our FULLY VALUED recommendation for SPH as its current share price valuation at 24x PE and 4.5% yield is expensive premised on our view that its core print ad revenue remains under pressure.
- Core media business continues to be dragged by declining advertising expenditure which we believe will lead to weaker adspend, and hence a poorer earnings outlook.
4Q16 results within expectations.
- FY16 (FYE Aug) net profit came in at S$265.3m, down by 17.5% y-o-y, while revenues declined by 4.5% to S$1.12bn.
- FY16 recurring operating profit fell by 13.7% y-o-y to S$305.2m, arising from lower revenue and impairment of goodwill and intangibles (S$28.4m) but mitigated partially by lower operating costs.
- A final/special dividend of 11 Scts was per share proposed. Including the interim dividend of 7 Scts paid, total dividend for FY16 was 18 Scts, lower than FY15’s 20 Scts and our expectations (19 Scts).
Adspend outlook weak given lackluster economy.
- With the recent weaker than expected 3Q16 GDP figures for Singapore, our economist signaled that downside adjustments persist. As such, this could continue to put pressure on adspend.
- We trimmed our FY17F/18F earnings by 3.5%/ 4.5% as we expect adspend to contract further, mitigated partially by costs control.
- We also expect downside pressure on DPS and project it to be 17 Scts for FY17F/18F.
Valuation
- TP of S$3.44 based on sum-of-parts. Our target price of S$3.44 is based on sum-of-parts valuation.
- We value SPH's core newspaper and magazine operations at S$1.49/share based on discounted cash flow model, SPH’s property business at S$1.38, and net cash and investments of SS$0.57 to derive our TP.
Key Risks to Our View
- Adex reversal, disposal of investment stake and expectations of special dividends. A strong economic recovery and pick-up in consumption will lead to adex improvement, which is a key risk to our view.
- Sale of its investments, such as M1, could also lead to expectations of higher special DPS.
Alfie Yeo
DBS Vickers
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Andy Sim CFA
DBS Vickers
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http://www.dbsvickers.com/
2016-10-17
DBS Vickers
SGX Stock
Analyst Report
3.44
Down
3.500