SPH – OCBC
Singapore Press Holdings: A soft landing for ad revenues
- FY13 figures mostly in line
- Cost savings of S$19m p.a. ahead
- S$100m New Media Fund
1QFY14 results within expectations
1QFY14 PATMI dipped 6.6% YoY to S$88.8m mostly due to lower contributions from the property segment after the SPH REIT spin-off and softer numbers from the core print business. We judge this set of results to be mostly in line with expectations as 1Q PATMI now makes up 26.8% of our full year estimates. In terms of the topline, 1QFY14 revenue came in at S$328.5m, up 2.0% YoY due to positive rental reversions from key property assets, The Paragon and The Clementi Mall, and partially offset by an anticipated decline in print revenue. Through we continue to see, in our view, a secular component in SPH’s advertisement and circulation revenues downtrend, which dipped by 2.8% and 4.7% YoY respectively over 1QFY14, the magnitude of the declines has largely been contained by management’s initiations to increase circulation and readership.
A soft landing for ad revenues
Given the dual challenges currently faced by the group in its traditional ad business – evolving industry dynamics driven by online media and weakening ad demand from the property sector which has peaked, newspaper ad and circulation revenues continued to dip over the quarter as anticipated. However, we see the overall ad revenue dip of 2.9% YoY (display ads down 1.7% and classified ads down 5.9%) to be fairly benign and leads us to establish a base-case of a long-drawn soft-landing scenario for SPH’s traditional print businesses. Cost-side items were mostly held in check over the quarter: staff costs increased 2.5% YoY while newsprints charge-out costs fell marginally to S$611/mt versus S$607/mt last quarter.
Maintain HOLD with unchanged S$4.14 fair value
Recall that management has set up a S$100m New Media Fund to invest in media-related businesses and has also began cost-saving initiatives to generate savings of S$19m per annum and we would expect updates from the group going into 2QFY14. Maintain HOLD with a fair value estimate of S$4.14.