SPH – OCBC

Impacted by absence of fair value gains

  • PATMI
    hit by absence of fair value gains

  • Ad outlook remains difficult
  • Stable performances from malls

 

PATMI decline due to absence of fair value gains

3QFY14 PATMI declined a dramatic 52.2% YoY mostly due to the absence of fair value gains recognized last year from the REIT spin-off. Operating profit for the quarter, however, increased 7.5% YoY as the group contained operating costs effectively and also benefited from the absence of an S$15.6m impairment charge taken in the corresponding period last year. Overall, we judge the latest quarter to be mostly within expectations and YTD operating profit now cumulates to S$268.8m, which constitutes 83.3% of our forecast for the year. We opt to tweak our operating profit forecast for FY14 up by 4.0% to S$335.6m to account for the marginally lower “other operating expenses‟ item year-to-date.

Ad revenues outlook remains challenging

In terms of the topline, 3QFY14 revenues dipped 4.9% YoY to S$309.7m as core newspaper and magazine revenues decreased S$19.7m. We continue to see a difficult outlook for print ads, with display and classified revenues in 3QFY14 falling 9.8% and 7.8% YoY, respectively. Given headwinds in the domestic residential sector (a key contributor to ad revenues) and persistent competition from a structural shift to new media channels, we believe this print ad downtrend is unlikely to be reversed over the nearer term. Newsprint prices remained stable at S$607/mt in 3QF14, versus S$611/mt in 2QFY14, while YTD staff costs increased 7.1% YoY to S$285.6m. Staff headcount as at end May-14 remained mostly stable at 4,242 versus 4,274 as at end May-13.

Stable performance from the property segment

Performance from the group‟s property segment remained firm, with revenues inching up 1.6% YoY to S$51.0m in 3QFY14 as higher rental income was derived from both Paragon and The Clementi Mall. YTD operating profit for the property segment, before finance costs and fair value gains, is

Stable performance from the property segment

Performance from the group‟s property segment remained firm, with revenues inching up 1.6% YoY to S$51.0m in 3QFY14 as higher rental income was derived from both Paragon and The Clementi Mall. YTD operating profit for the property segment, before finance costs and fair value gains, is mostly flat YoY at S$110.7m. We also understand the Seletar Mall is on target to complete by Dec-14. Maintain HOLD on SPH with an unchanged fair value estimate of S$4.13.

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