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

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.

2Q/1H17 net profit within our expectations 

  • 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.

Media business still struggling; transformation takes time 

  • 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.

Cost discipline is key 

  • 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.

Bright spot in property 

  • 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.

Investment income and associates save the day 

  • 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.

Lower interim DPS, but hold for potential special dividends 

  • 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
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 3.360 Same 3.360