SPH – OCBC

AD REVENUES IMPACTED BY COOLING MEASURES

  • 2QFY13 numbers tracking below
  • Ads hit by pty and automobile measures
  • Still exploring REIT listing

2QFY13 PATMI of S$72m down 15% YoY

SPH reported 2QFY13 PATMI of S$71.6m – down 14.7% YoY mostly due to a lower contribution from the Newspaper and Magazines segment. 1HFY13 PATMI now forms 45% of our FY13 forecast; despite 2Q being a weaker quarter cyclically, we now judge earnings to be tracking marginally below expectations as SPH’s ad revenues suffered the impact of recent property and automobile cooling measures. Topline for the quarter came in at S$282.5m, which decreased 5.5% YoY mostly due to weaker newspapers numbers but partially offset by an increase in property rental income from Paragon’s positive rental reversions. An interim dividend of 7 S-cents per share is announced.

A challenging 2Q for newspapers

Overall, 2Q was challenging for SPH’s newspapers segment and we see the market likely showing a neutral/mildly negative reaction to this set of results. Ad revenues fell S$13.9m (down 7.6% YoY) to S$168.5m, as advertisers from the property and automobile segments pulled back in the aftermath of recent cooling measures. In addition, circulation revenue also dipped by S$2.4m (down 4.9% YoY) as the physical subscription base declined (including digital subscribers, however, total circulation volume remained steady). We see cost-side items mostly kept in check over 1HFY13: staff costs fell 2.1% YoY to S$174.6m while newsprints charge-out costs fell marginally to S$626-S$644/mt. SPH’s property segment continues to be the bright spot, with Paragon’s 1HFY13 rental income up by S$3.4m (up 4.5% YoY) from higher rental rates. Occupancies at Paragon and Clementi Mall were maintained at 100%. The Seletar Mall remains on track to be completed by end of 2014.

Still exploring REIT option

Management expressed that it is still in the midst of exploring a REIT listing and that one key variable being deliberated is the stake of its assets to be divested. A REIT listing continues to be a realistic event, in our view, given the size and quality of its retail malls and the potential for significant shareholder accretion. Maintain BUY with an unchanged fair value estimate of S$4.94.

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