Singapore Press Holdings

UOBkayhian on 12 Sep 2014

FY14F PE (x): 24.0
FY15F PE (x): 22.6

4QFY14’s adspend contraction mirrors 3QFY14’s. Our monthly page monitor of The Straits Times suggests advertising spending (adspend) remains weak, with a contraction of 9% yoy in 4QFY14 (June-Aug 14). This mirrors 3QFY14’s actual contraction of 9.1% yoy (2QFY14: -7.3%, 1QFY14: -2.9% yoy). Singapore Press Holdings (SPH) had earlier attributed 3QFY14’s large contraction to fewer property launches and car ads. We are maintaining our FY14 net profit forecast of S$335m, implying a net profit of S$75.2m vs a reported net profit of S$89.6m for 3QFY14.

Seasonally, the 4Q of any financial year is weaker than 3Q. Despite a large top-line contraction, operating profit has been maintained on cost cutting. Earlier SPH had reported a 7.5% yoy increase in recurrent EBIT despite a 4.9% yoy decline in group revenue. We expect a final DPS of 14 S cents (FY13 final DPS: 15 S cents). Flat share price but dividend yield is decent. SPH’s print revenue is expected to perform in tandem with Singapore’s muted GDP growth which is projected at 3.5% for 2014 and 3.8% for 2015. Traditionally, share price has had a good correlation with domestic economic growth. Share price is expected to be flat, but annual dividend yields of 4.4-4.6% for FY15-16 are decent amid a low interest-rate environment. Maintain HOLD. We maintain our target price of S$4.20 which is based on sum-of-theparts (SOTP) valuation. Our recommended entry price is S$4.00 and below.