SPH - DBS Research 2017-04-17: Earnings Continue To Decline On Weak Ad Spend

SPH - DBS Vickers 2017-04-17: Earnings continue to decline on weak ad spend SINGAPORE PRESS HLDGS LTD T39.SI

SPH - Earnings continue to decline on weak ad spend

  • 2Q17 in line; drop in revenue and earnings declines was expected.
  • Interim dividend of 6 Scts declared.
  • Strategic review of M1 stake underway; may lead to special dividends.
  • Maintain HOLD and S$3.39 TP.

What’s New 

  • Headline revenue and earnings of S$516m (-7.1% y-o-y) and S$119.7m (-22.7%) were in line with our forecasts. The weak revenue continued to be affected by weak adex spend, with media segment declining by 12% y-o-y to S$168m. 
  • With staff costs flat at S$92m, operating profit declined by 22% to S$53m. 
  • Interim dividend of 6 Scts was declared.
  • SPH has undertaken initiatives to grow its digital circulation base by increasing the number of paying subscribers on pure digital plans, and conversion of those under print plans to an all-in-one plan. It is partnering with the various telcos to include its digital content on their virtual newstands and bundling its digital, radio content with telco plans to help subscribers access its content online. 
  • Other key ad spend sources are banks, autos, telcos, and supermarkets. 
  • SPH had also won the tender for two new radio stations (one English and one Mandarin) in March.
  • Occupancy for The Seletar Mall remains at 100% with rental rates in the mid-teen levels. More than 80% of the mall’s leases will be up for renewal in Nov 2017, and SPH is in the midst of negotiating lease renewals with the objective of raising yields before the anticipated injection The Seletar Mall into SPH REIT. There are no plans for any AEIs (asset enhancement initiatives) as of now. 
  • SPH has raised its stake in Chinatown Point from 7.35% to 27.35% in Nov 2016 at a price of S$2,077 per square foot based on net lettable area, based on an agreed property value of S$442.5m.
  • Strategic review of M1 stake is ongoing. If successful, this may lead to special dividends. 
  • Maintain HOLD and TP of S$3.39 based on SOTP.

Alfie YEO DBS Vickers | Andy SIM CFA DBS Vickers | http://www.dbsvickers.com/ 2017-04-17
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 3.390 Same 3.390