M1 – MayBank Kim Eng
Dishing out special dividends
- M1 declared a special dividend of 7.1 cents for FY13, as expected. Including the final dividend of another 7.1 cents, it will pay out 120% of its FY13 profit.
- In our view, there could be more special dividend payouts to come as we expect free cash flow to remain strong this year and capex to decline next year.
- Maintain BUY. TP is lowered slightly to SGD3.86 as we factor in lower growth forecasts for fibre revenue that will slightly offset strong growth in data usage.
What’s New
M1’s FY13 net profit of SGD160m was slightly below our expectations of SGD169m, mainly due to lower-than-expected fibre revenue. But the telco delivered on the one thing we had anticipated the most – an additional substantial payout to shareholders. It declared a special dividend of 7.1 cents a share for FY13, equalling the final dividend of 7.1 cents a share. Taking advantage of its strong balance sheet, with a net debt/EBITDA ratio of just 0.6x, M1 will be paying out 120% of its FY13 net profit in total.
What’s Our View
We lower our target price slightly to SGD3.86 as we scale back our FY14E-16E forecasts on lower expectations for the fibre business. However, we think there is potential for M1 to further return cash to shareholders this year. Its free cash flow should remain strong in FY14E and guidance for lower capex in FY15E indicates that net debt/EBITDA will stay low at 0.6-0.7x for this year and the next. We maintain our BUY call on M1, which stays as our top Singapore telco pick.
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 – 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.