Singapore Press Holdings - CGS-CIMB Research 2019-01-14: 1QFY8/19 Awaiting Better Entry Level


Singapore Press Holdings - 1QFY8/19: Awaiting Better Entry Level

  • SPH's 1Q19 reported net profit of S$57.9m (-6.3% y-o-y) was in line. Maintain HOLD.
  • Media segment slightly weaker than expected, with topline and PBT margin down 6.8% and 1.2% pts y-o-y but drop in print ad sales slowed to 2.7% y-o-y.
  • Scale and quality of overseas assets remain key to SPH’s strategy for capital recycling and earnings rejuvenation.

Uninspiring 1Q19 results

  • SINGAPORE PRESS HLDGS LTD (SGX:T39) reported 1QFY8/19 net profit of S$57.9m, in line at 27% of our/consensus full-year forecasts.
  • Operating revenue was flat at S$254m as the S$6.3m revenue from the newly-acquired UK purpose-built student accommodation portfolio (“PBSA”) offsets the 6.8% y-o-y decline in the media segment.
  • Its reported PATMI still fell 6.3% y-o-y due to lower media PBT margin (1Q19: 19.9%, 1Q18: 21.1%), higher financing costs, absence of investment disposal gains and lower associates’ contribution.
  • See SPH's announcement dated 2019-01-11 for 1QFY19 Financial Results presentation slides.

Mixed media performance

  • SPH's Print Ad revenue in 1Q19 recorded a y-o-y drop of 2.7%, the slowest seen in four quarters. SPH’s digital-first strategy also gained some traction, with digital revenue up 10.1% y-o-y. However, media revenue continued to be dragged by steeper-than-expected declines in classifieds (-17.1% y-o-y) and circulation (-10.8% y-o-y).
  • The lower circulation volume helped to reduce overall material costs despite 26% growth in average newsprint charge-out prices. We note that 1Q is seasonally stronger for the media segment.

Maiden contribution by overseas asset management

  • Already SPH's largest profit generator at c.55%, the property segment continues to grow with the recent purchase of Figtree Grove (via its 70%-owned SPH REIT (SGX:SK6U)) and tender for a mixed development site at Pasir Ris. The group’s first UK PBSA (c.S$300m assets) also contributed S$6.3m and S$3.2m to its topline and PBT, respectively.
  • We see faster expansion of its overseas asset management portfolio and better quality assets as possible near-term catalysts for the stock.

Slow progress at Woodleigh

  • While the average launch price of over S$2,000 psf was above our forecast of S$1,850 psf for Woodleigh Residences, we think the property cooling measures introduced in 2018 could affect the uptake rate of the project (slated for completion by end-Aug 2022). We understand that only 55% of the first 50 units released were sold during the soft launch, with the second phase scheduled for 3QFY19.

Maintain HOLD with a lower SOP-based Target Price

  • As we assume higher property income from SPH REIT, our FY19-21F EPS are now 0.6- 2.0% higher. However, our SOP-based Target Price falls to S$2.64 as we allocate a bigger RNAV discount to its Woodleigh project, in line with the broad property market.
  • Maintain HOLD.
  • Upside/downside risks could stem from media performance and pace of capital recycling.

NGOH Yi Sin CGS-CIMB Research | https://research.itradecimb.com/ 2019-01-14
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.64 DOWN 2.740