SPH

OCBC on 16 Jul 2012

SPH’s 3QFY12 PATMI of S$99.8m was down 13.1% YoY mostly due to a lower investment income component (-S$14.2m YoY). YTD PATMI, while marginally below consensus, tracked closely to our estimates, and forms 75% and 73% of OIR and consensus FY12 forecasts, respectively. We see a sustained trend of lower YoY newspaper ad revenues driven mainly by weaker classified ad demand which fell 9.0% YoY. Circulation revenues also declined 2.2% YoY as circulation volumes declined broadly across SPH’s products. We believe current data-points highlight increasing uncertainties ahead for its core print businesses and judge its shares to be fairly valued around current price levels. That said, we also see limited price downside here with an attractive dividend yield of c.5.5%. Downgrade to HOLD, with an unchanged fair value estimate of S$4.05. We would turn buyers around S$3.90 levels.

3QFY12 results in line
Singapore Press Holding’s (SPH) 3QFY12 PATMI of S$99.8m (6 S-cents per share) was down 13.1% YoY mostly due to a lower investment income component (-$14.2m YoY). YTD PATMI, while marginally below consensus, tracked closely to our estimates and forms 73% and 75% of consensus and OIR FY12 forecasts, respectively. 3QFY12 topline came in at S$331.8m, up 0.9% YoY mainly due to the contributions from Clementi Mall.

Weak classified ad demand continues
In 3QFY12, we see a sustained trend of lower YoY newspaper ad revenues (down 1.3%) driven mainly by weaker classified ad demand which fell 9.0% YoY. Circulation revenues also declined 2.2% YoY as we saw broad volume declines across SPH’s papers. YTD 3Q12 staff costs, however, increased 2.6% YoY to S$272.3m due to bonus provisions and the ACP Magazines acquisition. Newsprint costs declined somewhat in 3QFY12 at US$677/MT versus S$$690 the previous quarter.

Steady performance from retail malls
SPH’s retail landlord business was the bright spot in 3QFY12 earnings. We saw YTD 3QFY12 revenues from the Paragon increase 3.2% YoY due to continued positive rental reversions. The Clementi Mall also clocked S$27.7m of rental income, a healthy performance from a fully leased suburban mall enjoying strong daily foot traffic. Looking ahead, we expect the c.284k sq ft Seletar Mall to complete by 2016, adding another suburban mall into SPH’s retail portfolio.

Fairly priced - Downgrade to HOLD
At this juncture, we believe current data-points of falling circulation revenues and rising staff-costs highlight increasing uncertainties ahead for its core print businesses. While we favor SPH’s retail mall portfolio which would buttress future earnings, we judge that its shares are likely fairly valued around current price levels. That said, we also see limited price downside here with an attractive dividend yield of c.5.5%. Downgrade to HOLD, with an unchanged fair value estimate of S$4.05. We would turn buyers around S$3.90 levels.