Singapore Press Holdings - OCBC Investment 2017-01-16: Underwhelming start to the year

Singapore Press Holdings - OCBC Investment 2017-01-16: Underwhelming start to the year SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings - Underwhelming start to the year

  • Weak earnings within expectations.
  • Ad outlook remains soft.
  • Continued focus on cost discipline.

1QFY17 PATMI down 44% YoY 

  • Singapore Press Holdings (SPH)’s 1QFY17 PATMI declined 43.8% to S$45.7m mostly due to a S$15.9m charge arising from the media business review and impairment of an associate, and a decline of S$12.6m in profits from the media business. 
  • We also saw a S$1.8m net loss from investments over the quarter due to fair value losses on forward hedges for portfolio investments, versus a net gain of S$10.3m in the same quarter last year. In terms of the topline, group revenues in 1QFY17 similarly fell 6.0% YoY to S$278.3m due to the impact from a slowing economy and ongoing disruption of the media industry.
  • Revenue contributions from the group’s key media segment dipped 9.5% YoY in the latest quarter as advertisement revenues decreased 13.5%. 
  • While this quarter’s earnings were fairly weak, they came in mostly within our expectations and 1QFY17 PATMI now constitutes 20.0% of our full year forecast.

No respite for ailing ad business 

  • Ad demand continued its decline over the latest quarter. Total newspaper ad revenues dipped 15.0% YoY in 1QFY17 as classified and display figures both declined 16.0% and 12.5% YoY, respectively. 
  • Circulation revenues, however, increased 1.8% YoY as the group increased newspaper cover prices in March last year. 
  • The management team has been focused on cost management and, excluding the one-time S$15.9m charge this quarter, the group’s operating expenditure fell 5.2% YoY and we understand that SPH will be implementing wage restraint measures in 2017 to further contain costs.

Maintain SELL with S$3.41 FV estimate 

  • On the brighter side, SPH’s property segment continues to show resilience with revenue contributions up 1.3% YoY to S$60.5m. 
  • Given the uncertain economic outlook and the continuing disruption of the media industry, we expect conditions to remain challenging for the group’s media business ahead. 
  • Maintain SELL on the stock on valuation grounds with an unchanged fair value estimate of S$3.41.

Carmen Lee CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-01-16
OCBC Investment SGX Stock Analyst Report SELL Maintain SELL 3.410 Same 3.410