SPH – Lim and Tan
- The final dividend of 17 cents (normal 9 and special 8) brings the total for the fiscal year ended Aug ’12 to 24 cents (unchanged from the year before), for a yield of 5.9%.
- This would have been a greater plus if the board had committed to a clearer dividend policy, of say a minimum or a certain percentage of recurring earnings, even if it were to mean a lower yield.
- Note that the $386.37 mln dividend in respect of ye Aug ’12 already represents 94% of recurrent earnings.
- Results for ye Aug ’12 (net profit down 5.9% to $365.54 mln) are in line with recent past, with decline in the core newspapers / magazines business being offset by property contributions. (The latest decline was also blamed on the drop in investment income.)
- Classified advertisements (almost 30% of display ads) continued to decline, by 8% in the latest fiscal year.
- Contributions from the Clementi Mall have replaced Sky @ 11, adding to Paragon. (The Seletar Mall, a 70-30 JV with UE is scheduled for completion in late calendar year 2014.)
- The 5.9% yield remains the sole reason for maintaining BUY.
SPH – CIMB
Chugging along
The underlying business continues to chart a steady course, allowing management to declare a 24Scts dividend again. Earnings were lower because of weaker investment income. Property remains the star performer and could help make FY13's dividend payout even larger.
FY12 earnings came in largely in line, at 95% of our and consensus estimates. We tweak our FY13-15 numbers slightly on lower circulation revenue leading to a marginally lower SOP target price. Our Outperform rating is maintained; stronger rental income and ad revenue growth are rerating catalysts.
FY12 review
Operating profit came in slightly higher than last year, but earnings were lower yoy on weaker investment income. Management guided that newsprint charge out rates have come down slightly and if they stay around the current level, margins are likely to creep up in 2H13. FY12 saw the property arm continue to provide robust growth, offsetting the gradual decline in circulation revenue (-2.7% yoy). Ad revenue (-0.7% yoy) was down due to fewer property advertisements after the government introduced cooling measures.
Property outperformance
We expect the property arm to continue being the star performer in FY13. This year saw rental increases at both Paragon (+S$4.6m, +3.1% yoy) and Clementi Mall on the back of a full year of operations (+S$18.6m, + 3.1% yoy). As Clementi Mall matures, rentals will continue to see good upside. The expected completion of Seletar Mall by end-FY14 should further increase the group's recurring earnings base.
Dividends may possibly grow
We think there is a chance dividends may increase on higher recurring profit as Clementi Mall matures. The 24Scts of dividend declared represents a yield of 6% The balance sheet is still in good shape; net gearing stands at 0.4x.
SPH – CIMB
Chugging along
The underlying business continues to chart a steady course, allowing management to declare a 24Scts dividend again. Earnings were lower because of weaker investment income. Property remains the star performer and could help make FY13's dividend payout even larger.
FY12 earnings came in largely in line, at 95% of our and consensus estimates. We tweak our FY13-15 numbers slightly on lower circulation revenue leading to a marginally lower SOP target price. Our Outperform rating is maintained; stronger rental income and ad revenue growth are rerating catalysts.
FY12 review
Operating profit came in slightly higher than last year, but earnings were lower yoy on weaker investment income. Management guided that newsprint charge out rates have come down slightly and if they stay around the current level, margins are likely to creep up in 2H13. FY12 saw the property arm continue to provide robust growth, offsetting the gradual decline in circulation revenue (-2.7% yoy). Ad revenue (-0.7% yoy) was down due to fewer property advertisements after the government introduced cooling measures.
Property outperformance
We expect the property arm to continue being the star performer in FY13. This year saw rental increases at both Paragon (+S$4.6m, +3.1% yoy) and Clementi Mall on the back of a full year of operations (+S$18.6m, + 3.1% yoy). As Clementi Mall matures, rentals will continue to see good upside. The expected completion of Seletar Mall by end-FY14 should further increase the group's recurring earnings base.
Dividends may possibly grow
We think there is a chance dividends may increase on higher recurring profit as Clementi Mall matures. The 24Scts of dividend declared represents a yield of 6% The balance sheet is still in good shape; net gearing stands at 0.4x.
M1 – Kim Eng
Hold on for the dividend
iPhone effect already factored in. M1 will report its 3Q12 results on 15 Oct. We expect service revenue to be SGD190-191m (flat QoQ) and net profit to fall QoQ to SGD33-34m, with EBITDA margin expected to fall further QoQ. However, margins should rebound in 4Q12 and beyond as the effects of the iPhone 5 wane. With dividends likely to be maintained at 2011 level of SGD0.45 a share, the stock’s yield of 5.5% should limit downside. However, positive catalysts are limited and likely to stay so until late 2013 at least. Maintain HOLD.
Handset subsidies to spike in short term. iPhone 5 was launched on 21 Sep. M1’s accounting allows it to offset part of the handset cost against future revenue. However, it is not a full offset and we do expect margins to be affected. Also, the high-end Galaxy S3 should also have exerted a negative impact on margins, as it was launched only in May 2012 (just 1 month of sales in 2Q12) and unlike iPhone, M1 expenses off subsidies for Android phones immediately.
Expect to see lower margins in 3Q12. Despite falling two percentage points to an unprecedented low of 38% in 2Q12 (mainly due to higher subscriber acquisition and retention costs), we estimate EBITDA margin could have fallen another two percentage points or more QoQ to approximately 36% in 3Q12.
But margins should improve thereafter. Margins may stay depressed in 4Q12 from spillover iPhone effects. However, we should see an improvement in the following quarters as the impact of the more expensive handsets evens out. Generally, Android phones excluding the hugely popular high-end models such as the Galaxy S3, carry lower subsidy costs than the iPhone. In the longer term therefore, the greater popularity of Android handsets should boost margins and earnings due to their lower costs relative to the iPhone.
Earnings depressed but dividends to be maintained. We had downgraded full year earnings following 2Q12 results. However, management has committed to maintaining dividends at 2011 level of SGD0.145 a share, hence M1’s tradionally healthy yields (currently 5.5%) will also remain intact. This should support the stock on the downside despite a lack of fundamental catalysts in the short term.
M1 – Kim Eng
Hold on for the dividend
iPhone effect already factored in. M1 will report its 3Q12 results on 15 Oct. We expect service revenue to be SGD190-191m (flat QoQ) and net profit to fall QoQ to SGD33-34m, with EBITDA margin expected to fall further QoQ. However, margins should rebound in 4Q12 and beyond as the effects of the iPhone 5 wane. With dividends likely to be maintained at 2011 level of SGD0.45 a share, the stock’s yield of 5.5% should limit downside. However, positive catalysts are limited and likely to stay so until late 2013 at least. Maintain HOLD.
Handset subsidies to spike in short term. iPhone 5 was launched on 21 Sep. M1’s accounting allows it to offset part of the handset cost against future revenue. However, it is not a full offset and we do expect margins to be affected. Also, the high-end Galaxy S3 should also have exerted a negative impact on margins, as it was launched only in May 2012 (just 1 month of sales in 2Q12) and unlike iPhone, M1 expenses off subsidies for Android phones immediately.
Expect to see lower margins in 3Q12. Despite falling two percentage points to an unprecedented low of 38% in 2Q12 (mainly due to higher subscriber acquisition and retention costs), we estimate EBITDA margin could have fallen another two percentage points or more QoQ to approximately 36% in 3Q12.
But margins should improve thereafter. Margins may stay depressed in 4Q12 from spillover iPhone effects. However, we should see an improvement in the following quarters as the impact of the more expensive handsets evens out. Generally, Android phones excluding the hugely popular high-end models such as the Galaxy S3, carry lower subsidy costs than the iPhone. In the longer term therefore, the greater popularity of Android handsets should boost margins and earnings due to their lower costs relative to the iPhone.
Earnings depressed but dividends to be maintained. We had downgraded full year earnings following 2Q12 results. However, management has committed to maintaining dividends at 2011 level of SGD0.145 a share, hence M1’s tradionally healthy yields (currently 5.5%) will also remain intact. This should support the stock on the downside despite a lack of fundamental catalysts in the short term.