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Investor CentralSingapore Press Holdings Limited - When will growth finally pick up?
18/1/2013 – Singapore Press Holdings (SPH) has reiterated its outlook that it provided in its Q4 FY12 results, and that is that print advertisement revenue will continue to move in line with the performance of Singapore economy.
It also expects newsprint charge-out rate to remain unchanged.
Its retail properties, Paragon and The Clementi Mall, are fully leased and continue to turn in a steady performance.
The Seletar Mall is expected to be completed by the end of 2014.
SPH remains conservative in its portfolio allocation and expects lower returns.
Come to think of it, it gives the same outlook one quarter after another.
The company just announced earnings for Q1 FY13:
Revenue: -3.1% YoY to S$322.1 mln
Operating profit: -9.8% YoY to S$109.4 mln
Profit: -6.6% to S$91.1 mln
Cash flow from operations: S$168 mln vs S$130 mln
Dividend: Nil vs Nil
Revenue came in lower due to weaker performance from newspapers and magazines.
The exhibitions business also slowed due to annual shows being held on different dates in the comparative period.
Brokers are NEUTRAL on the stock as they believe that the persistent trend of falling circulation and advertisement revenues point to increasing uncertainties in SPH’s core newspapers and magazines business.
This would put pressure on SPH’s overall operating margins over the mid to long term.
But its growing retail mall business continues to perform well.
OCBC Research says an attractive dividend yield at 5.8% will support the stock price.
Hence, it maintained a HOLD rating with a target price of S$4.05.
It would turn buyer around S$3.90 levels.
DBS Vickers Research also maintained its HOLD rating with a target price of S$4.01.
DMG OSK Research highlighted that SPH is profiting in Malaysia as it is the current market leader in online classifieds.
In Indonesia and Philippines however, it is in 2nd place and is still loss making.
However, management sees potential for online classifieds business to grow.
Newswires had indicated that classified site Le Bon Coin’s (SPH’s partner in online classifieds) business has been growing substantially.
Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.
1. When will growth finally pick up?
The trend of weak print advertisement performance continued in Q1 FY13 with revenue declining 4.1% mainly due to classified ads falling 10.5%, while display ads also dipped 1.1%.
DBS expects GDP to grow by 1.6% in 2012 and 3.2% in 2013.
So, no relief in sight, with DBS Research expecting ad revenue to remain flat FY13 and grow just 2% in FY14.
Growth should be supported by stable contribution from its property rental income.
2. Will SPH become a property counter?
This might sound far-fetched, but just look at the statistics.
Property rental now accounts for 15% of revenue and 21.7% of the group’s profit before tax, up from 14% and 19.7% a year ago.
One quarter after another, the news is always the same: media business unsexy, property business very sexy.
How long before the unsexy business is hived off? Or is this impossible, given the role SPH's publications play in 'nation building'? In other words, will SPH have to continue to operate the printing presses as a national service, even if property grew to become a much bigger revenue driver?
We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.
Sofar, we have not had a reply (which is why you are seeing this message).
Sources & further information
Statutory disclosure
Press release
Presentation materials
OCBC Research Report
DBS Vickers Research Report
DMG OSK Research Report
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