No surprises; maintain NEUTRAL

2QFY12 recurring earnings grew 14% YoY, within our expectations. SPH reported 2QFY12 recurring earnings of S$90m (-26% QoQ) which made up 20% of our full year forecast. 2Q has historically been a weaker quarter. Property segment was the main contributor with rental income up 21% YoY on the back of higher contribution from Clementi Mall and higher rental rates from Paragon. Another comforting note was that 1HFY12 “Others” segment PBT losses were narrowed by 64% to S$5.6m. We continue to see a lack of catalysts for share price upside and maintain NEUTRAL with TP of S$3.91. An interim dividend of 7S¢ per share has been declared. SPH’s FY12 dividend yield of 6.2% still remains attractive.

Decline in N&M performance offset by property and others. 1HFY12 N&M PBT was down 6% due to lower ads from the banking and FMCG sectors. This was offset by better performance from the “Others” segment (comprising of internet and exhibitions) whose decline narrowed by 64% to S$5.6m. Property continued to contribute strongly as expected with 1HFY12 PBT growth of 43% to S$48m on the back of higher rental income from Clementi Mall (100% leased) and higher rental rates from Paragon.

Newsprint and staff costs remain stable. 1HFY12 staff costs increased only by a marginal 1% to S$178.3m despite a 4% increase in average headcount (from the acquisition of ACP Magazines) as bonus pools were reduced from the weaker performance in the N&M segment. Newsprint charge out prices remains stable as well with 2QFY12 prices flat QoQ (compared to previous seven quarters of consecutive increases).

SOTP-derived TP of S$3.91. We value the core media segment based on 11x FY12 P/E, Paragon (S$2.4b) with assumption of a 5% revaluation gain, Clementi Mall (S$266m) with assumption of average passing rent of S$15/sqft, cap rate of 5.5%, M1 and Starhub at DMG TP and investments as at Feb 12.

2QFY12 RESULTS MOSTLY IN LINE

•Falling recruitment ad demand

•Stable retail landlord numbers

•7 S-cent interim dividend declared

2QFY12 results mostly within expectations

Singapore Press Holdings’ (SPH) 2QFY12 PATMI came in at S$83.9m, or 5 S-cents per share, which was 16% higher YoY. Recurring income (before income from investments and associates) for the quarter was S$90.1m – up 14% YoY mostly due to Clementi Mall’s contributions. 1HFY12 PATMI now make up 46% of our full year forecast, falling short mainly due to lower investment income. 2QFY12 topline was S$298.5m – in-line with our expectations – and making up 50% of our full year forecast. An interim dividend of 7 S-cents was declared.

Pressure from falling recruitment ad demand

1HFY12 print advertisement and circulation revenues were both marginally lower YoY (down 0.3% and 1.4% respectively), with pressure coming mainly from lower demand for recruitment ads and lower circulation. Average staff headcount in 1HFY12 increased 3.7% to 4,228. However, staff costs were mostly flat at S$178.3m (up 0.6% YoY) as bonuses (pegged to profitability benchmarks) decreased. Newsprint costs were stable in 2QFY12 at US$690/MT versus S$$691 the previous quarter.

Another strong quarter from retail malls

We saw another strong quarter from retail landlord operations. Paragon revenue in 1HFY12 increased 2.2% (S$1.6m) due to positive rental reversions. The Clementi Mall also took in S$18.2m in rental income; it is currently 100% leased with daily foot traffic around 60k. Management indicates that development plans for its new commercial development in Sengkang (70:30 JV with United Engineers Limited) is proceeding as planned; completion is expected within four years.

Maintain BUY

We continue to view SPH favorably as it continues to ramp up on its retail mall strategy, which would constitute a stable counterweight to its print business going forward. We note that group investible funds currently stand at S$0.9bn, which points to sufficient capacity for further allocation into its retail strategy ahead. Maintain BUY with a higher fair value estimate of S$4.05 (versus S$3.99 previously) mostly due to stronger assumptions for Clementi Mall.

SPH posts Q2 net profit of $84m

Operating revenue rose 3.7% to $298m; recurring earnings rose 14.2% over the year to $90m

SINGAPORE Press Holdings (SPH) yesterday reported an 11.6 per cent rise in net profit for the second quarter, lifted by higher rental income from its operations of two shopping malls and a slight boost in print advertising revenue.

SPH said net profit for the three months ended Feb 29, 2012, stood at $84.1 million, up from $75.4 million the same period a year ago.

But this translated to earnings per share (EPS) of five cents for the quarter, representing flat growth in EPS compared with the year-ago period.

Operating revenue for the publishing giant rose 3.7 per cent to $298 million. Recurring earnings for Q2 rose 14.2 per cent over the year to $90.1 million.

The group's recurring earnings for its media and property businesses refer to profit before investment income and share of net loss or profit of associates and jointly controlled entities.

Rental income for the group rose 21.6 per cent to $48 million for the period. Clementi Mall recorded rental income of $9.2 million, which is $7.8 million higher than the same period a year ago, during which the mall was not fully operational.

Revenue from Paragon was up by 1.7 per cent, or $700,000, thanks to higher rental rates.

Turnover from SPH's newspaper and magazine business registered flat growth at $235 million, dragged down by a fall in circulation revenue.

Print advertisement revenue nudged higher by 0.8 per cent to $178 million, though circulation revenue was down 1.1 per cent at $49.7 million. Operating revenue from the group's other businesses also rose 12.9 per cent in Q2 to $15.9 million over the year, due mainly to growth in the Internet business.

Net income from investments for the quarter plunged 57.4 per cent to $4.37 million, given a reversal of provision for a loss on derivatives last year.

Share of net profit of associates and jointly controlled entities stood at $2.41 million, swinging from a net loss of $216,000 a year ago. These would include profits from MediaCorp Press, MediaCorp TV Holdings, and OpenNet, and net losses from its other media investments, SPH said.

Staff costs – SPH's biggest cost component – dipped 0.3 per cent to $90 million, due to lower variable bonus provision that was partially offset by salary increments.

For the half-year period, net profit was up 2.2 per cent at $182 million, with operating revenue for the six months rising 4 per cent to $631 million.

SPH will pay out an interim dividend of seven cents per share. Shares of SPH closed unchanged at $3.89 yesterday.

SPH to press mall business advantage

SINGAPORE Press Holdings (SPH) is hoping to cement its track record of owning Paragon and The Clementi Mall and establish a foothold in the retail mall sector in the long term.

‘We aim to build on the track record of our property portfolio and establish our presence in the retail mall sector,’ said SPH CEO Alan Chan. ‘This complements our wide spectrum of media and other businesses, and helps to boost the group’s total returns.’

The media group, which won a bid for a commercial site in Sengkang yesterday, said that it would continue to explore ways to enhance its property portfolio when opportunities arose. Apart from owning Paragon and a 60 per cent stake in The Clementi Mall, SPH is also the developer of luxury condominium Sky@eleven at Thomson Road.

For the newly won site that sits at the junction of Sengkang West Avenue and Fernvale Road, the group intends to create a commercial development catering to the lifestyles and needs of residents living in Sengkang and the north-eastern regions of Hougang, Punggol and Serangoon.

‘The immediate catchment area, which comprises Sengkang and parts of Hougang, Serangoon, Ang Mo Kio and Punggol, has a good demographic profile,’ a spokesman for the group said. ‘The majority of the residents are in the economically active age groups and the majority of households are within the middle-income level of $5,000 and above.

‘Moreover, there is potential to increase the catchment size as Sengkang is fast being built-up and increasingly being populated.’

The tender for the site was won by Earth Holdings Pte Ltd with a bid of $328 million, or $1,155.52 per square foot per plot ratio (psf ppr). It has a lease of 99 years and can be developed to a maximum gross floor area of 283,856 sq ft.

Earth Holdings is a 70-30 joint venture between wholly owned units of SPH and United Engineers.

The site acquisition will be funded through a combination of internal resources and external borrowings.

SPH to press mall business advantage

SINGAPORE Press Holdings (SPH) is hoping to cement its track record of owning Paragon and The Clementi Mall and establish a foothold in the retail mall sector in the long term.

‘We aim to build on the track record of our property portfolio and establish our presence in the retail mall sector,’ said SPH CEO Alan Chan. ‘This complements our wide spectrum of media and other businesses, and helps to boost the group’s total returns.’

The media group, which won a bid for a commercial site in Sengkang yesterday, said that it would continue to explore ways to enhance its property portfolio when opportunities arose. Apart from owning Paragon and a 60 per cent stake in The Clementi Mall, SPH is also the developer of luxury condominium Sky@eleven at Thomson Road.

For the newly won site that sits at the junction of Sengkang West Avenue and Fernvale Road, the group intends to create a commercial development catering to the lifestyles and needs of residents living in Sengkang and the north-eastern regions of Hougang, Punggol and Serangoon.

‘The immediate catchment area, which comprises Sengkang and parts of Hougang, Serangoon, Ang Mo Kio and Punggol, has a good demographic profile,’ a spokesman for the group said. ‘The majority of the residents are in the economically active age groups and the majority of households are within the middle-income level of $5,000 and above.

‘Moreover, there is potential to increase the catchment size as Sengkang is fast being built-up and increasingly being populated.’

The tender for the site was won by Earth Holdings Pte Ltd with a bid of $328 million, or $1,155.52 per square foot per plot ratio (psf ppr). It has a lease of 99 years and can be developed to a maximum gross floor area of 283,856 sq ft.

Earth Holdings is a 70-30 joint venture between wholly owned units of SPH and United Engineers.

The site acquisition will be funded through a combination of internal resources and external borrowings.