SPH – OCBC

RETAIL LANDLORD STRATEGY COMING ALONG NICELY

Print ads slow down

Offset by Clementi Mall income

Support from 6.5% dividend yield

1QFY12 PATMI of S$97.5m or 6 S-cents per share.

Singapore Press Holdings (SPH) reported 1Q12 PATMI of S$97.5m or 6 S-cents per share, down 4.7% YoY. This was mainly due to a poorer performance from the Newspaper and Magazine segment, offset by added contributions from Clementi Mall. 1Q12 PATMI formed 26.3% of our FY12 forecast and is broadly in line with expectations. The topline came in at S$332.4m which is 4.3% higher YoY due to Clementi Mall (rental income of S$9m) and new shows in the exhibitions business, but was partially offset by Newspaper and Magazine revenues falling 1.2% YoY.

Print advertisement performance softer YoY.

As anticipated, we saw 1QFY12 revenues from print advertisement fell 1.2% YoY, driven by declines in both display and classified ads. Display ads demand from the fast moving consumer goods and banking/finance segments fell relative to 1QFY11, while demand increased from the property and fashion segment. There were also pressure from operating costs; newsprint and staff costs increased 4.2% and 1.5%, respectively.

Retail property strategy coming along nicely.

Clementi Mall contributed S$9m to revenues as it ramped up into full operations this quarter, its added contributions buttressing earnings significantly. We like the visibility of recurring income from a suburban retail mall, and believe management’s strategy of building a stable counterweight to the print business is coming along nicely. With ~S$1.2bn of investible funds in its arsenal, we expect SPH to add to its retail landlord portfolio over FY12-13.

Upgrade to BUY.

We also saw a S$12.9m mark-down in available-for-sale assets, made up in part of listed equities in listed telcos and REITs. While more mark-downs could come if equity markets soften, we are not overly concerned given the yield and defensiveness of these holdings. Upgrade to BUY at a fair value estimate of S$3.99 and expected dividends of S$0.24 in FY12.

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