Singapore Press Holdings - OCBC Investment 2018-07-13: Two Steps Forward, One Step Back

Singapore Press Holdings - OCBC Investment Research 2018-07-13: Two Steps Forward, One Step Back SINGAPORE PRESS HLDGS LTD SGX:T39

Singapore Press Holdings - Two Steps Forward, One Step Back

  • No big surprises in 3Q.
  • Digital and non-media push.
  • Cooling measures cast a shadow.

3QFY18 results in-line

  • SPH’s 3QFY18 scorecard was broadly in-line with our expectations. The group’s operating revenue of S$250.1m dipped 3.8%, forming 25.1% of our full-year forecast. This was brought about primarily by an 8.0% drop in media revenue, though we note that the y-o-y decline in print ad revenue continues to taper over the course of sequential quarters.
  • Revenue for the group’s property segment dipped 2.4% y-o-y to S$60.1m, while revenue from the other businesses rose S$6.1m y-o-y to S$22.0m.
  • PATMI for 3QFY18 rose 64.3% y-o-y to S$47.4m, on the back of lower impairment charges taken in the quarter. Excluding one-offs, core PATMI came in at S$57.9m, forming 26.5% of our full-year forecast. This report is shared at SGinvestors.io.

Growing both media and non-media businesses

  • We remain heartened by the group’s digital transformation efforts. The daily average of digital copies in circulation continues to increase sequentially q-o-q, increasing by 43.5% y-o-y in 3QFY18 to 399k copies. Total digital revenue for 9MFY18 has grown by ~12.5% y-o-y to S$74.5m, though comprising only 14% of media revenue at this stage. We believe these are all steps in the right direction, but it might still be too early to call for a bottoming out of media revenue declines.
  • As part of the group’s diversification of income streams, we think that SPH is actively looking at the real estate asset management market in the UK, specifically in assets within the education space that have cap rates of between 5-7%. This report is shared at SGinvestors.io.

Blind spot

  • While the group’s joint project with Kajima in Bidadari was a positive factor for SPH previously, this is now no longer the case.
  • In light of the surprise property cooling measures, there could be potential risks to the project’s overall ASP and intended launch. We believe management will adopt a wait-and-see approach, taking into account any ASP adjustments at Park Colonial, which is situated in the vicinity.
  • The group’s joint project accounts for ~ 11.9% of our current GAV estimates.
  • We keep our estimates for now till more clarity is available. Maintain HOLD with an unchanged fair value of S$2.52. This report is shared at SGinvestors.io.

Joseph Ng OCBC Investment Research | https://www.iocbc.com/ 2018-07-13
SGX Stock Analyst Report HOLD Maintain HOLD 2.520 Same 2.520