Singapore Press Holdings - CIMB Research 2017-04-13: 2QFY8/17 Results ~ Down But Not Out

SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings - 2QFY8/17 results: down but not out

SPH’s 2QFY17 net profit of S$54m missed consensus but met our expectations at 24% of our full-year forecast.
It was not a pretty sight for the core media business (newspaper, classifieds and display ads) with its 2QFY17 revenue falling 12% yoy and 17% qoq.
The only bright spots were property (PBT up 10% qoq, 18% yoy), associates’ contribution and investment income.

Maintain Hold with SOP-based target price of S$3.36 and slight EPS tweaks. The stock offers a 4.8% dividend yield for FY17-19F, with potential for special dividends.

SPH’s 2QFY17 revenue of S$238m was 22% of our/consensus’ full-year forecast, which we deem in line due to the seasonally-weaker quarter.
Its net profit of S$54m was down 1% yoy but up 17% qoq, thanks to the absence of the S$15.9m one-off charge recorded in 1QFY17 arising from restructuring of media business.
Its 1HFY17 net profit of S$99m missed consensus but met our expectations at 44% of our full-year forecast.

2QFY17’s media revenue fell 12% yoy and 17% qoq due to declines in newspaper (- 18.5% yoy), classifieds (-16.6% yoy) and display ads (-19.3% yoy).
Circulation revenue fell 6% qoq but was stable on a yoy basis, as digital gained stronger traction relative to print newspapers.
Management is looking to leverage on SPH’s brand equity and content to sell across various platforms and expand its audience reach, hence building a stronger proposition to advertisers and benefiting its events/conferences business.

We expect newsprint prices to remain stable in 2017, but tighter supplies could lead to price growth from FY18F onwards.
Total headcount fell at a faster pace of 1.6% qoq to 4,041 at end-Feb, though such cost savings typically have a lagged effect.
We note that the strategic review and rightsizing of its business remains ongoing.

The property segment revenue grew 2.5% qoq and 1.3% yoy in 2QFY17, backed by positive rental reversion across all three malls, while PBT (ex-fair value gains) increased 10% qoq and 18% yoy.
The overall occupancy remained strong at 100%, despite signs of rising occupancy costs for Paragon Mall.
82% of Seletar Mall’s lease is due for renewal by Nov, of which 25% have already been renewed. These assets continue to offer recurring income for SPH.

Net income from investments (S$16.8m) was significantly higher yoy in 2Q17, driven by higher gains on disposal of investments (from the media fund) to partially offset the fair value losses on hedges for portfolio investments.
The share of results of associates and joint ventures also saw a marked improvement from 2QFY16’s S$0.7m loss to 2QFY17’s S$2.4m profit, due to narrowing losses from the regional online classifieds business and an increased stake to 27% in Perennial Chinatown Point.

SPH declared a lower interim DPS of 6Scts (2Q17: 7Scts) in view of the challenging media business, which led us to trim our FY17F DPS to 17Scts (prev. 18Scts).
But we maintain our view that any strategic sale of M1 stake and/or Seletar Mall could yield special dividends.
We maintain Hold with an unchanged SOP-based target price of S$3.36.
Changes in Singapore’s economy could pose upside/downside risks to our call.

NGOH Yi Sin CIMB Research | http://research.itradecimb.com/ 2017-04-13

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