Singapore Press Holdings - UOB Kay Hian 2018-09-04: 4QFY18 Page Count Declines 14% Y-o-y On Weak Display Ads Segment

Singapore Press Holdings (SPH SP) - UOB Kay Hian Research 2018-09-04: 4qfy18 Page Count Declines 14% Yoy On Weak Display Ads Segment SINGAPORE PRESS HLDGS LTD SGX:T39

Singapore Press Holdings (SPH SP) - 4QFY18 Page Count Declines 14% Y-o-y On Weak Display Ads Segment

  • Our page count of The Straits Times shows total pages fell 14.3% y-o-y for 4QFY18, and 13% y-o-y for FY18. Display ads continued to see widening decline rates. The decline suggests print revenue declined ~12%, which suggests earnings could come in higher by ~2% vs our estimate. 
  • Print revenue declines could re-accelerate in future quarters as tailwinds from property advertising dissipate.
  • No change to earnings forecasts. Maintain HOLD and target price of S$2.58.
  • Entry price: S$2.45.



WHAT’S NEW


4QFY18 total page count decline widened to 14.3% y-o-y.



~ SGinvestors.io ~ Where SG investors share
  • Our page count of The Straits Times recorded a decline of 14.3% (4QFY17: -9.9%, 3QFY18: -12.5%), an acceleration on both a y-o-y and q-o-q basis. For the three segments, recruit ads page count fell 13.2% (4QFY17: -21.4%), classifieds fell 15.8% (4QFY17: -17.9%) and display fell 14% (4QFY17: -6.6%).

FY18 total page count declined 13% y-o-y.

  • Total page count decline on a full-year basis was also larger at 13% y-o-y (FY17: -9.9%), led by double-digits declines for all three segments. Save for the recruit segment, the other two segments saw widening decline rates.


STOCK IMPACT


4QFY18 print revenue expected to decline 11-12%.

  • Given the slightly higher percentage decline in page count for 4QFY18, we expect print revenue to weaken by more than the 9-10% that was seen in prior quarters. This implies a full-year print revenue decline of ~12%.

Earnings upside risk of 2% assuming print revenue decline of 12%.

  • Our earnings estimate of S$209m will rise by 1.6% should full-year revenue decline come in at 12% vs our current assumption of 13%. Our current valuation of S$2.58 will edge up by 1% to S$2.61 in that scenario.

Wane in property advertising could see print revenue decline re-accelerate in future quarters.

  • Post the cooling measures, property advertising likely fell. Tailwinds from the housing market are dissipating, and the de-coupling between print revenue and page count decline seen in the last two quarters may reverse in the future. 
  • It seems unlikely that digital ad revenue growth can fully offset the drop in property advertising given the former only made up 8% of 9MFY18 revenue.

Property ad counts have indeed declined.

  • A cursory count of display ads by type and size in the Saturday Straits Times over 4QFY18 suggests this to be the case. Property display ads not only saw a progressive decline in page counts, it also saw its proportion against total pages slip from a peak of 10% in late-June to ~4-5% at present.


EARNINGS REVISION/RISK

  • No change to earnings or dividend estimates.


VALUATION/RECOMMENDATION


Maintain HOLD and target price to S$2.58.

  • Our target price remains unchanged at S$2.58, which values the media business on a DCF basis (WACC: 6.1%, terminal growth rate: 0%), M1 at target price of S$1.55, healthcare at 20x 2018F PE and the rest of its listed entities at market value.
  • While the media business is not out of the woods yet, there is upside risk from potential acquisitions on the property front that could mitigate the weakness. 
  • Maintain HOLD. Entry price is S$2.45.





Foo Zhiwei UOB Kay Hian Research | https://research.uobkayhian.com/ 2018-09-04
SGX Stock Analyst Report HOLD Maintain HOLD 2.580 Same 2.580



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