Singapore Press Holding

OCBC on 17 Apr 2012

Singapore Press Holdings’ (SPH) 2QFY12 PATMI came in at S$83.9m, or 5 S-cents per share, which was 16% higher YoY. 1HFY12 PATMI now make up 46% of our full year forecast, falling short mainly due to lower investment income. 2QFY12 topline was S$298.5m - in-line with our expectations - and making up 50% of our full year forecast. An interim dividend of 7 S-cents was declared. We continue to view SPH favorably as it continues to ramp up on its retail mall strategy - a stable counterweight to its print business going forward. Group investible funds currently stand at S$0.9bn, which points to sufficient capacity for further allocation into its retail strategy ahead. Maintain BUY with a higher fair value estimate of S$4.05 (versus S$3.99 previously) mostly due to stronger assumptions for Clementi Mall.

2QFY12 results mostly within expectations
Singapore Press Holdings’ (SPH) 2QFY12 PATMI came in at S$83.9m, or 5 S-cents per share, which was 16% higher YoY. Recurring income (before income from investments and associates) for the quarter was S$90.1m – up 14% YoY mostly due to Clementi Mall’s contributions. 1HFY12 PATMI now make up 46% of our full year forecast, falling short mainly due to lower investment income. 2QFY12 topline was S$298.5m - in-line with our expectations - and making up 50% of our full year forecast. An interim dividend of 7 S-cents was declared.

Pressure from falling recruitment ad demand
1HFY12 print advertisement and circulation revenues were both marginally lower YoY (down 0.3% and 1.4% respectively), with pressure coming mainly from lower demand for recruitment ads and lower circulation. Average staff headcount in 1HFY12 increased 3.7% to 4,228. However, staff costs were mostly flat at S$178.3m (up 0.6% YoY) as bonuses (pegged to profitability benchmarks) decreased. Newsprint costs were stable in 2QFY12 at US$690/MT versus S$$691 the previous quarter.

Another strong quarter from retail malls
We saw another strong quarter from retail landlord operations. Paragon revenue in 1HFY12 increased 2.2% (S$1.6m) due to positive rental reversions. The Clementi Mall also took in S$18.2m in rental income; it is currently 100% leased with daily foot traffic around 60k. Management indicates that development plans for its new commercial development in Sengkang (70:30 JV with United Engineers Limited) is proceeding as planned and is expected to have a maximum GFA of ~284k sq ft. Completion is expected within four years.

Maintain BUY
We continue to view SPH favorably as it continues to ramp up on its retail mall strategy, which would constitute a stable counterweight to its print business going forward. We note that group investible funds currently stand at S$0.9bn, which points to sufficient capacity for further allocation into its retail strategy ahead. Maintain BUY with a higher fair value estimate of S$4.05 (versus S$3.99 previously) mostly due to stronger assumptions for Clementi Mall.