SPH – OCBC

Twin initiatives for growth and cost savings

  • FY13 figures mostly in line
  • Cost savings of S$19m p.a. ahead
  • S$100m New Media Fund

Final dividend of 15.0 S-cents per share SPH reported FY13 (ending 31 Aug) PATMI of S$431.0m – down 25.0% – mainly due to a lower fair value gain on investment properties and a S$40.4m increase in the “other operating expenses” item. This increase comprises S$26.0m of non-recurring charges, including an impartment of an overseas magazine subsidiary, and a S$8.0m hike in promotion costs for its online businesses. Accounting for one-time items, core PATMI is estimated at S$348.9m, which constitutes 96.5% of our FY13 forecast and is judged to be mostly in line. In terms of the topline, newspaper and magazine revenue for FY13 was S$991.2m, decreasing 3.9% YoY due to declines in both advertisement and circulation. A final dividend of 15.0 S-cents per share was announced.

Initiatives to generate S$19m cost savings per annum

SPH’s traditional newspaper and magazines business continue to face headwinds in the form of declining advertisement (down 4.0%) and circulation revenues (down 3.6%). On the cost-side of the equation, however, we saw staff cost decreasing 2.9% as variable bonuses were reduced. Newsprint prices also held steady at US$607 over 4QFY13. In addition, management has began cost-saving intitatives that are expected to generate savings of S$19m per annum. Over FY13, property rental income increased 3.5% due to higher rental rates from Paragon while income from Clementi Mall remained stable. Seletar Mall remains on track and we expect completion by Dec 14.

Driving growth in new media businesses

To further drive growth, SPH will set up a S$100m New Media Fund to invest in mediarelated businesses. Currently, the group’s online classified businesses across SE Asia has an enterprise value of S$303m, and management expects its new media businesses, together with its retail property segment, to form two key pillars for growth ahead. Overall, we see management’s initiatives for growth and cost savings to be key positives and would look for execution and preliminary results over 1HFY14. Maintain HOLD with a fair value estimate of S$4.14.

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