SPH – DBSV

Hold for yield

  • FY12 net profit declined 6% – marginally below expectations
  • Final and special dividend of 17Scts, brings FY12 dividend to 24Scts, similar to FY11
  • Ad revenue growth to remain lackluster on an uncertain economic outlook, FY13-14F earnings trimmed 3-5%
  • Hold for 5.9% yield, TP stays at S$4.01

FY12 marginally below expectations. FY12 results ended 6% down y-o-y to S$365.6m on the back of a drop in print ad revenues (-0.7%), higher operating expenses (+4.5%) and lower investment income (-35%). Notwithstanding the weaker profits, dividends were in line with expectations with a final and special dividend of 17 Scts proposed to be paid on 21 Dec 2012. This brings FY12 dividends to 24 Scts, similar to FY11 and equates to a yield of c.5.9%.

Weaker newspaper ad revenues. Newspaper print ad revenues dropped by 5% y-o-y in 4Q12, larger than the – 1.5% y-o-y decline in 3Q12. Display and classified ads dipped by 3% and 9% y-o-y, respectively. We believe the uncertain global economic climate and slower GDP growth for Singapore will continue to weigh on print ad revenues for SPH. Our economist recently revised his Singapore GDP forecasts down to 1.8% and 3.2% for 2012 and 2013, from 2.5% and 3.5%, respectively.

Hold for 5.9% yield, TP remains at S$4.01. We have revised down our ad revenue growth in FY13F to zero growth, from 2% previously. Our forecasts are hence lowered by 4.6%/ 3.4% for FY13F/ 14F. This is partially mitigated by a lower newsprint charge out rate assumed at US$640/mt and US$600/mt in FY13F and FY14F respectively. Our sum-of-parts TP remains S$4.01 as we roll our valuation base to FY13F. While we see lackluster growth for the group mainly due to economic headwinds coupled with a higher cost environment, we believe downside should be supported by the payment of 17Scts dividends in Dec, and a relatively healthy dividend yield of 5.9% based on our expectations of 24Scts dividend in FY13F.

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