Author: kktan
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.
SPH – MayBank Kim Eng
Lack of catalysts; maintain HOLD
- SPH’s 1QFY8/14 results were in line with market expectations.
- The property division will likely be its growth driver in the short term as the core media business continues to languish.
- In our view, the risk is that SPH might have to cut its FY8/14E dividend if it does not raise payout ratio to above 100%. Maintain HOLD.
What’s New
SPH’s 1QFY8/14 results were in line with market expectations. Revenue grew 1.7% YoY but net profit fell 6.6% YoY, mainly due to the dilution effect from last year’s spin-off of SPH REIT. 1Q net profit of SGD88.8m accounted for 27.5% of our full-year forecast. Given the modest outlook for Singapore’s GDP growth and our bearish view on the property market, we do not see any clear catalysts for its core media business in the short term.
What’s Our View
SPH’s media business continued to languish in 1QFY8/14 and we think a recovery is unlikely any time soon. Advertisement and circulation revenue declined by 2.8% and 4.7% YoY respectively. The property division was the only growth driver for the group. Paragon and The Clementi Mall remain fully occupied and their revenue contribution grew 5.4% YoY in the first quarter.
We only expect 1.1% core EPS growth (excluding revaluation gains on properties) for FY8/14E and 1.6% growth for FY8/15E. In our view, the key risk is that SPH might have to cut its FY8/14E dividend if it does not raise payout ratio to above 100%.
Maintain HOLD with the target price unchanged at SGD4.18.
STEng – OSK DMG
Marine Business To Provide Stability
Following a series of positive announcements from the company, we reaffirm our confidence in STE continuing to deliver. Apart from the healthy project backlog of SGD12.5bn as of 3Q13, the company has also generated more stable income by expanding its maintenance services segment as well as investing in the aircraft leasing and ferry service businesses. Maintain BUY, with a DCF-based TP of SGD4.56.
Orderbook to last till end-2015. ST Marine announced that it has secured new orders worth about SGD446m in 4Q13. This is on top of the USD350m worth of contracts to build two units of container roll-on/roll-off (Ropax) vessels which it secured earlier. These contracts largely involve logistics management, maintenance, major upgrade and conversion works for the offshore industries, contracted to be carried out at the Singapore Tuas yard. Of more significance is that the company’s environmental business based in China was awarded a contract to design a niche Pneumatic Waste Collection System for high-rise commercial and residential projects in Guangzhou. As such, we believe that STE’s marine business focused on customised and high engineering content work is supported by a robust orderbook that will last till end-2015.
More recurring income stream. ST Marine also announced a week ago that it will invest in a 10% stake in a newly established cruise ferry service business, Nova Star Cruises Limited, which operates between Yarmouth in the US and Portland in Canada, with Quest Navigation holding the remaining 90% stake. The investment is aimed at providing a more stable income stream as well as downstream support to the group’s shipbuilding business, as it will bareboat charter ST Marine’s Ropax vessel for the next three years, with an option to extend up to seven years. Elsewhere, ST Marine also recently equipped its 140-hectare Mississippi yard with new ship repair capability, thus opening up a geographically-diversified stream of stable maintenance revenue.
STEng – OCBC
Reducing peg to 19x FY14F EPS
- Price correction after 3Q13 results
- A solid engineering conglomerate
- Maintain HOLD
3Q13 lead to market’s re-examination
Singapore Technologies Engineering (STE) had a good run from 31 Dec 2012 to 7 Nov 2013. Its share price rose 9.9%, outstripping the STI’s 1.1% increase over the same period. However, STE’s 3Q13 results announced on 7 Nov 2013 missed ours and the street’s expectations. 9M13 EPS of 13.34 S cents formed only 66% and 68% of the street’s and our prior FY13 forecast. While 3Q13 revenue grew 0.5% YoY to S$1.55b, PATMI fell 9.9% to S$131.4m. Since then, STE’s share price has fallen 7.6% from S$4.20 to S$3.88 (versus a 2.4% decline for the STI). While the miss was in large part due to one-off items, we believe that investors have begun to apply lower valuations to STE to bring its multiples closer in line with its peers after the outperformance and with gradually less interest in yield plays such as STE due to the progressive tapering by the US Fed.
Still hauling in the contracts
STE reported yesterday that ST Marine has secured new orders worth about S$446m in 4Q13. These orders are in addition to the recent contract worth about US$350m won by its US shipyard, VT Halter Marine, Inc for the design and construction of two units of Container Roll-on/Roll-off vessels and the bareboat charter contract for a Roll-on/Roll-off Passenger vessel.
Lower FY14F P/E peg
Based on our estimates, FY14 could show a 14% YoY increase in EPS to 20.6 S cents. Re-examining STE’s peer group’s multiples, we note that its regional peers are trading at a Bloomberg forward P/E of 17.2x. STE is a well-run, diversified conglomerate with defensive characteristics due to its fairly stable government-related work (e.g. 37% of 3Q13 revenue) and it deserves to trade at least on par with, if not at a premium to, its peer group. We lower our peg from 21x to 19x (applied to FY14F EPS of 20.6 S cents), which reduces our FV on STE from S$4.32 to S$3.91, and maintain a HOLD rating on STE on valuation grounds. FY14F dividend yield is 4.7%.
Lower FY14F P/E peg
Based on our estimates, FY14 could show a 14% YoY increase in EPS to 20.6 S cents. Re-examining STE’s peer group’s multiples, we note that its regional peers are trading at a Bloomberg blended forward P/E of 17.2x. STE is a well-run, diversified conglomerate with defensive characteristics due to its fairly stable government-related work (e.g. 37% of 3Q13 revenue) and it deserves to trade at least on par with, if not at a premium to, its peer group. We lower our peg from 21x to 19x (applied to FY14F EPS of 20.6 S cents), which reduces our FV on STE from S$4.32 to S$3.91, and maintain a HOLD rating on STE on valuation grounds. FY14F dividend yield is 4.7%.
STEng – OCBC
Reducing peg to 19x FY14F EPS
- Price correction after 3Q13 results
- A solid engineering conglomerate
- Maintain HOLD
3Q13 lead to market’s re-examination
Singapore Technologies Engineering (STE) had a good run from 31 Dec 2012 to 7 Nov 2013. Its share price rose 9.9%, outstripping the STI’s 1.1% increase over the same period. However, STE’s 3Q13 results announced on 7 Nov 2013 missed ours and the street’s expectations. 9M13 EPS of 13.34 S cents formed only 66% and 68% of the street’s and our prior FY13 forecast. While 3Q13 revenue grew 0.5% YoY to S$1.55b, PATMI fell 9.9% to S$131.4m. Since then, STE’s share price has fallen 7.6% from S$4.20 to S$3.88 (versus a 2.4% decline for the STI). While the miss was in large part due to one-off items, we believe that investors have begun to apply lower valuations to STE to bring its multiples closer in line with its peers after the outperformance and with gradually less interest in yield plays such as STE due to the progressive tapering by the US Fed.
Still hauling in the contracts
STE reported yesterday that ST Marine has secured new orders worth about S$446m in 4Q13. These orders are in addition to the recent contract worth about US$350m won by its US shipyard, VT Halter Marine, Inc for the design and construction of two units of Container Roll-on/Roll-off vessels and the bareboat charter contract for a Roll-on/Roll-off Passenger vessel.
Lower FY14F P/E peg
Based on our estimates, FY14 could show a 14% YoY increase in EPS to 20.6 S cents. Re-examining STE’s peer group’s multiples, we note that its regional peers are trading at a Bloomberg forward P/E of 17.2x. STE is a well-run, diversified conglomerate with defensive characteristics due to its fairly stable government-related work (e.g. 37% of 3Q13 revenue) and it deserves to trade at least on par with, if not at a premium to, its peer group. We lower our peg from 21x to 19x (applied to FY14F EPS of 20.6 S cents), which reduces our FV on STE from S$4.32 to S$3.91, and maintain a HOLD rating on STE on valuation grounds. FY14F dividend yield is 4.7%.
Lower FY14F P/E peg
Based on our estimates, FY14 could show a 14% YoY increase in EPS to 20.6 S cents. Re-examining STE’s peer group’s multiples, we note that its regional peers are trading at a Bloomberg blended forward P/E of 17.2x. STE is a well-run, diversified conglomerate with defensive characteristics due to its fairly stable government-related work (e.g. 37% of 3Q13 revenue) and it deserves to trade at least on par with, if not at a premium to, its peer group. We lower our peg from 21x to 19x (applied to FY14F EPS of 20.6 S cents), which reduces our FV on STE from S$4.32 to S$3.91, and maintain a HOLD rating on STE on valuation grounds. FY14F dividend yield is 4.7%.