Singapore Press Holdings (SPH SP) - UOB Kay Hian 2018-06-13: Page Count Still Down, But Showing A Moderation In Pace

Singapore Press Holdings (SPH SP) - UOB Kay Hian 2018-06-13: Page Count Still Down, But Showing A Moderation In Pace SINGAPORE PRESS HLDGS LTD SGX: T39

Singapore Press Holdings (SPH SP) - Page Count Still Down, But Showing A Moderation In Pace

  • Our page count of The Straits Times showed a fall of 12.5% y-o-y (2QFY17: 12.7%).
  • The pace of decline appears to be moderating, and print revenue decline for FY18 appears to be shaping up for 10-11% for the year.
  • We note a slight decoupling in the correlation between physical page counts and print revenue.
  • Our earnings estimates are unchanged. Maintain HOLD with a revised target price of S$2.46. Entry price: S$2.40.



WHAT’S NEW

  • Based on our page count of Singapore Press Holdings’ (SPH) The Straits Times, total page count was down 12.5% y-o-y in 3QFY18. By segment, the Recruit, Classifieds and Display ads saw declines of 10%, 15% and 12% respectively. 
  • Except for Display ads, the 3QFY18 decline represented an improvement from that seen in both the same period last year (3QFY17) and the prior period (2QFY18).


STOCK IMPACT

  • Page count decline comparable to the 12.7% y-o-y decline seen in 2QFY18, while at the same time representing an improvement from the 13.7% y-o-y decline seen in 3QFY17. The figure reflects a q-o-q improvement, which is largely expected given that the third quarter is traditionally strong.
  • Correlation between physical page counts and ad revenue falling. A strong correlation between our page count and revenue had existed. However, this has weakened since 1QFY18, as noted by the smaller-than-expected revenue decline vs the page count decline. This suggests that there may be underlying reasons such as higher ad density or more full-page ads that our simple page count does not capture. Another reason is the integrated marketing approach SPH has taken for its advertising, which presumably is driving higher take-ups.
  • Print revenue decline shaping up to be a 10-11% decline for FY18. Assuming that 3QFY18 sees a revenue decline of 9-10% y-o-y like in 2QFY18 – which had a similar page count decline – full-year print revenue would shape up for a 10-11% decline. Our assumption currently stands at a 13% y-o-y decline and we will look to 3QFY18 actuals before revising our assumptions. A revision upwards to a 10-11% decline translates to FY18 earnings of S$216m-219m (+3-5% to our current estimates).


EARNINGS REVISION/RISK

  • No change to earnings or dividend estimates. Our dividend forecasts are unchanged at 13 S cents per year for 2018-20.


VALUATION/RECOMMENDATION


Maintain HOLD with higher target price of S$2.46.

  • Our target price rises slightly, largely due to the incorporation of the actual holding value of M1 as of FY17, which lifts the valuation of SPH’s investments from S$0.38 to S$0.45 per share.
  • SPH's share price is currently up on positive sentiment arising from the move towards overseas property asset management and the lower-than-expected print revenue decline in 2QFY18. Future property acquisitions can potentially offset media earnings weakness in the short-term and provide share price support. While this is a step in a more positive direction, we remain skeptical about the potential uplift given the property cycle in the target markets.
  • Over the longer-term, SPH needs to fully address the short-comings of the media business in order to justify an earnings recovery and spur a re-rating. 
  • Maintain HOLD, entry price S$2.40.







Foo Zhiwei UOB Kay Hian | https://research.uobkayhian.com/ 2018-06-13
SGX Stock Analyst Report HOLD Maintain HOLD 2.46 Up 2.410



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