2QFY14 operating income came in at S$53.5m, down 36.8% YoY, mostly due to lower ad contributions, staff costs rising 18.2% (S$15.6m) and a S$9.9m impairment charge. The latter two were related to the cost-saving initiatives implemented last year as management restructured the framework for staff compensation and also optimized printing capacity with the removal of a press line. For the quarter, the group also recognized a S$52.9m one-time gain for the partial divestment of 701Search to Telenor, which resulted in PATMI increasing 7.5% YoY to S$81.3m. Overall, we judge 2Q numbers to be a miss; ad contributions were below expectations and we revise our FY14 operating income forecast down by 16.5% to S$322.7m, after incorporating 2Q’s one-time items as well. Management declared an interim dividend of 7.0 S-cents. We update our valuation model for weaker print assumptions and latest valuations for listed holdings, and our fair value dips marginally to S$4.13 from S$4.14 previously. Maintain HOLD.
Hit by one-time charges from cost initiatives
2QFY14 operating income came in at S$53.5m, down 36.8% YoY, mostly due to lower ad contributions, staff costs rising 18.2% (S$15.6m) and a S$9.9m impairment charge. The latter two were related to the cost-saving initiatives implemented last year as management restructured the framework for staff compensation and also optimized printing capacity with the removal of a press line. For the quarter, the group also recognized a S$52.9m one-time gain for the partial divestment of 701Search to Telenor, which resulted in PATMI increasing 7.5% YoY to S$81.3m. Overall, we judge 2Q numbers to be a miss; ad contributions were below expectations and we revise our FY14 operating income forecast down by 16.5% to S$322.7m, after incorporating 2Q’s one-time items as well. Management declared an interim dividend of 7.0 S-cents.
Difficult outook for ad revenue
The outlook for ad revenue remains difficult, with the decline accelerating to a -7.3% YoY dip in 2QFY14 versus -2.9% in 1QFY14. Management continues to cite tough conditions, particularly in the property space as the number of new launches fell significantly YTD. Material costs remained stable (newsprint unchanged QoQ at US$611/mt) while staff costs rose by S$15.6m. Going forward, management indicated that they would reduce headcount by ~300 from its current level of 4.3k, but expect the staff costs run rate to increase by ~S$10m p.a., given growth incentives embedded in the group’s compensation structure. On the property front, the Seletar Mall is on target to complete by Dec-14. The asset is now ~60% pre-leased and rental rates are likely to be in the low teens.
Maintain HOLD with marginally lower S$4.13 fair value
We update our valuation model for weaker print assumptions and latest valuations for listed holdings, and our fair value dips marginally to S$4.13 from S$4.14 previously. Maintain HOLD. There could be a mild pull-back after latest 2Q figures but we see the downside likely capped with a fairly attractive yield of 5.7% here.
2QFY14 operating income came in at S$53.5m, down 36.8% YoY, mostly due to lower ad contributions, staff costs rising 18.2% (S$15.6m) and a S$9.9m impairment charge. The latter two were related to the cost-saving initiatives implemented last year as management restructured the framework for staff compensation and also optimized printing capacity with the removal of a press line. For the quarter, the group also recognized a S$52.9m one-time gain for the partial divestment of 701Search to Telenor, which resulted in PATMI increasing 7.5% YoY to S$81.3m. Overall, we judge 2Q numbers to be a miss; ad contributions were below expectations and we revise our FY14 operating income forecast down by 16.5% to S$322.7m, after incorporating 2Q’s one-time items as well. Management declared an interim dividend of 7.0 S-cents.
Difficult outook for ad revenue
The outlook for ad revenue remains difficult, with the decline accelerating to a -7.3% YoY dip in 2QFY14 versus -2.9% in 1QFY14. Management continues to cite tough conditions, particularly in the property space as the number of new launches fell significantly YTD. Material costs remained stable (newsprint unchanged QoQ at US$611/mt) while staff costs rose by S$15.6m. Going forward, management indicated that they would reduce headcount by ~300 from its current level of 4.3k, but expect the staff costs run rate to increase by ~S$10m p.a., given growth incentives embedded in the group’s compensation structure. On the property front, the Seletar Mall is on target to complete by Dec-14. The asset is now ~60% pre-leased and rental rates are likely to be in the low teens.
Maintain HOLD with marginally lower S$4.13 fair value
We update our valuation model for weaker print assumptions and latest valuations for listed holdings, and our fair value dips marginally to S$4.13 from S$4.14 previously. Maintain HOLD. There could be a mild pull-back after latest 2Q figures but we see the downside likely capped with a fairly attractive yield of 5.7% here.
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