SPH – OCBC

2QFY12 RESULTS MOSTLY IN LINE

Falling recruitment ad demand

Stable retail landlord numbers

7 S-cent interim dividend declared

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; 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.

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