Singapore Press Holdings - OCBC Investment 2017-04-17: Media headwinds unabated

Singapore Press Holdings - OCBC Investment 2017-04-17: Media headwinds unabated SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings - Media headwinds unabated

  • 2QFY17 results below expectations.
  • Difficult operating conditions.
  • Property segment stable.

2QFY17 results reflect difficult operating conditions 

  • SPH announced that 2QFY17 PATMI dipped marginally by 1.2% YoY to S$53.5m while group recurring earnings on an operating level declined 22.2% YoY to S$53.0m, which was partially offset by a S$9.5m bump in investment income from divestment gains. 
  • The share of results of associates and joint ventures also rose S$3.1m YoY partially due to smaller losses from the regional online classifieds business. 
  • In terms of the topline, group operating revenue fell 8.2% YoY to S$238.0m mostly due to weaker contributions from the media business which fell 11.9% YoY. 
  • We deem this set of results to be marginally below our expectations and we tweak our FY17 net income forecast down by 6% to S$216.0m to reflect the difficult business conditions the group is facing currently. 
  • An interim dividend of 6 S-cents per share was declared.

Management focused on cost controls 

  • 1HFY17 ad revenues declined 16.8% YoY as management cited continued headwinds in its operating environments due to the slowing economy and the unabated disruption of the media industry. 
  • Revenues from display and classified ads similarly fell 17.5% and 14.4% YoY, respectively. 
  • The management team has been focused on cost management and total costs for the quarter fell 3.8% YoY to S$188.7m despite inflationary pressures. 1HFY17 staff costs dipped 0.9% YoY to S$182.4m as headcount as at end Feb 2017 stood at 4,041 which was 5% lower than the 4,255 last year. 
  • The group’s property segment pulled in stable numbers with revenues inching up 1.3% YoY as rental income rose and net property income grew 5.9% to S$93.9m. All three retail assets held by SPH, i.e., The Paragon, The Clementi Mall and The Seletar Mall, enjoyed 100% occupancy and positive rental reversions over the quarter. 
  • 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/ 2017-04-17
OCBC Investment SGX Stock Analyst Report SELL Maintain SELL 3.410 Same 3.410