SPH launches new logo to signal future direction

Rebranding portrays group’s stature as top media outfit that is moving beyond just print

Singapore Press Holdings (SPH) yesterday launched a new corporate logo to mark the start of its 25th anniversary celebrations.

‘With SPH moving beyond print, it is time to rebrand ourselves to better represent our current portfolio and future direction,’ said SPH chairman Tony Tan.

Together with guest-of- honour President SR Nathan, Dr Tan unveiled the new logo at SPH’s News Centre headquarters yesterday, to fanfare and confetti.

The event, which kicked off to local street percussion band Strikeforce’s beats, was witnessed by the outgoing Minister for Information, Communication and the Arts Lee Boon Yang and Rear Admiral (NS) Lui Tuck Yew who is taking over Dr Lee’s position.

Also present were SPH directors including deputy chairman Cham Tao Soon, former minister for communications and information Yeo Ning Hong, former chief justice Yong Pung How, and former ministry of finance permanent secretary Ngiam Tong Dow, as well as business associates such as UOB’s chairman Wee Cho Yaw and some 300 employees and guests.

In his speech, Dr Tan said: ‘The media industry has changed dramatically over the past decade. I’m pleased that SPH has been quick to respond to these changes in the industry and has invested in new ventures that give us potential for growth.’

He explained that while print remains SPH’s core business, the company now owns online, mobile, outdoor and broadcast media, as well as non-media businesses like properties, directory searches, and events management.

Hence the need for a new logo to replace the old stylised graphic of the web and rollers of a newspaper printing press.

The new design, for which plans began in 2007, ‘portrays SPH’s initiative in engaging and connecting with all our stakeholders’, and ‘reinforces SPH’s stature as a leading media organisation – confident, authoritative yet approachable’, Dr Tan said.

In his speech, Dr Tan credited President Nathan with being key to the formation of SPH in 1984, through a merger of Singapore News and Publications Limited, Times Publishing Berhad, and the Straits Times Press group of which Mr Nathan was executive chairman.

Mr Nathan himself described his six years at Straits Times Press and in SPH as ‘a unique experience’, prior to which he had been in the civil service with no experience in the newspaper business.

He recounted: ‘The day before I started work, the then prime minister Mr Lee Kuan Yew told me: ‘Nathan, I’m giving you The Straits Times. It has something like 150 years of history. It is like a bowl of china. You break it, I can piece it together again, but it will never be the same. Try not to.’

‘I am proud to say that the bowl that was handed to me and passed on to successor leaders of SPH remains unbroken – in fact it has achieved a better glow with successive years.’

SPH now faces a new media climate, Mr Nathan said, with competition from electronic media and a wider base of more critical readers.

But, he added: ‘I am confident SPH with its 25 years of track record is well equipped to succeed in this new climate.’

In line with its 25th anniversary celebrations, SPH has also revamped its corporate website and SPH- owned shopping mall, Paragon, will be staging free weekend concerts in the next two months and giving out $25,000 in shopping vouchers.

SPH’s CEO Alan Chan said: ‘On this silver anniversary, I wish to assure all our stakeholders that as we celebrate our past 25 years of achievements, we are committed to achieving another 25 years of excellence, even in these challenging times.’

Attractive valuation. Upgrade to BUY

Falling revenue… Our checks in the industry have indicated that Singapore Press Holding’s (SPH) print advertising took a heavy hit in Nov/Dec period despite the last ditch advertising efforts by retailers to bring the year end to a less dismal sales closing. The lack of major events in Singapore in the first two months along with the dismal job market in the private sector did not help. As such, we expect adex and classified revenues to be negatively impacted. We initially expected print revenue to register a 3.6% YoY fall for FY09F but now knock it down to a 6.7% YoY drop to factor in the cratering economy. Circulation numbers should remain flattish for FY09 as we do not expect heavy subscription cancellations.

…But controlling costs. As shown from its historical operating data, SPH has three consecutive quarters of falling newsprint consumption while charge out prices (Exhibit 2 & 3) have been going up. With the volumous usage for the US presidential elections over, charge prices have thankfully started to tail off since the start of the year. Unfortunately, as SPH historically buys its raw materials on a 6 months forward basis, we are expecting high newsprint costs from Jan – Jun 2009. On the staffing front, SPH’s forge into new media businesses have been moderated by aggressive wage cuts announced yesterday.

Mark-To-Market losses might continue. We believe that SPH has not changed its equity and bond portfolios with its external fund managers since the last quarter. With the volatile equity and bond market, our initial assumptions of a return to a positive accretion from its investments are likely invalid in view of potential MTM losses overwhelming dividend income that it will receive from its investments.

Silver lining: Paragon and Sky@Eleven. Thankfully, SPH’s two property plays keep its head above water against a drowning property market. Paragon continues to sustain almost full occupancy even after its S$45m upgrade to add 29,000 sqft of space and Sky@Eleven’s progressive contribution will buffer its earnings.

Attractive valuation. SPH fell 23% since the downgrade in our last report. While we have lowered our SOTP fair value to S$2.84 (prev: S$3.13) as we align its valuation peg with its peers, we are upgrading SPH to BUY based on attractive valuations with dividend yield at ~9%. We are also impressed by the swift action taken to contain staffing cost, its highest expense
component.

Time to buy the daily

Upgrade to Buy. P/B at 1.8x is at lowest point in the last 20 years. Previous lowest P/B was 1.95x, in 1998. Wage cuts savings will mitigate fall in ad revenues. We believe SPH’s share price (-30% since Jan’09) has already factored in the weaker economic outlook. Dividend yield is attractive at >8%. TP: S$2.93 reflects a potential c.34% total returns upside.

Wage cuts savings… SPH will be cutting wages by 2%- 10% for 3,000 staff from 1 Apr. The savings from this and profit-related bonuses is an estimated 20% in wage bill for its core operations. Wages account for c.25% of revenue and c.40% of the Group’s costs. We view this as positive for the Group, to help mitigate fall in ad revenues.

Offsets drop in ad revenues. According to data from Nelsen Media Research, advertising revenues (AdEx) for the period from Sep’08 to Jan’09 fell by 10% y-o-y. In Jan, it fell by 25% y-o-y, deteriorating from a 14% y-o-y drop in Dec. We trimmed our ad revenue assumption and assumed a -20% yoy drop, from -15% previously. This offsets our estimated savings from the wage cuts.

Expect a weak 2Q. We expect SPH’s 2Q09 results to be weak on a c.20% fall in ad revenues, coupled with a high newsprint costs. However, we have taken this into account in our estimates. Current newsprint spot price is at c.US$680/mt versus our assumption of US$800 for FY09F.

Outlook priced in, lowest P/B in 20 years. We believe the current share price (-30% since Jan’09) has already priced in the weak economic outlook. Valuations are very attractive at 1.8x P/B with a dividend yield of >8%, based on our 20cents DPS assumption.

Upgrade to Buy. Our sum-of-parts derived target price is lowered to $2.93 (from $3.25) as we factor in lower RNAV for Paragon at S$1.69bn (based on a cap rate of 6%). We pegged our newspaper operations at 12x FY09F earnings, a premium to peers’ average, given SPH’s dominant position in Singapore. But, this is still lower than Star Publications’ PER of c.15x.

SPH cuts salaries up to 10%

Asian media giant Singapore Press Holdings (SPH) said on Thursday it will cut monthly staff salaries by between 2 and 10 per cent to reduce costs as revenues fall.

The salary cuts, which will take effect next month, and lower profit-related bonuses will enable the company to trim its wage bill by 20 per cent, SPH said in a statement.

The wage cuts will affect about 3,000 staff, with higher paid employees bearing the brunt of the reductions, it said. SPH added that it would freeze hiring and cut operating expenses, without giving details.

‘We need to bring our costs down in the face of a weaker advertising market and uncertain business environment,’ said SPH chief executive Alan Chan.

‘It is imperative that we prepare for a longer than expected downturn so that we can emerge stronger when the economy recovers.’

Profit-related bonuses will also be slashed, with senior management expected to see a reduction of about 30 per cent in their total annual remuneration, the company said.

SPH has seen its income affected by the global economic downturn with net profit in the first quarter to November falling 34.8 per cent to $73 million (US$47 million). — AFP

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