Event
Singapore Press Holdings (SPH) reported FY Aug11 results that were in line with market expectations and marginally better than we expected. A final dividend of 17 cents per share was declared (KE estimate: 18 cents), bringing full‐year dividend to 24 cents per share, or almost 100% payout. Amid softening advertising demand, the group’s other pillar of growth, retail property investment, would mitigate the weakness in core media earnings and drive a stock re‐rating. Maintain BUY with a target price of $4.17, based on a total return of 16.7%.
Our View
In the absence of property development revenue, total revenue dipped by only 9.4% YoY to $1,251.0m due to strong growth in its rental and exhibition businesses. Net profit fell by 22% to $388.6m. Comparing like‐for‐like, newspaper and magazine pre‐tax profit was flat at $365.6m; rental profit was up 32% YoY while investment income was up 39.6% YoY, driven by earlier gains in equities investments. The mild increase in staff costs (+2.3% YoY), the largest cost component, was a positive. Overall, operating margin was sustained at a healthy 30%.
Circulation levels were maintained at an average of 1m copies daily for FY Aug11 and with SPH’s penetration into the digital space since August this year via iPad and iPhone applications, the group’s advertising market share should remain well‐protected. Management has yet to see a notable slowdown in advertising demand in view of the weak economic outlook.
SPH will remain conservative in the asset allocation of its $1.3b investible fund. The payout of surplus capital to shareholders is unlikely as management may be drawing up plans to bid for well‐located mixed‐use commercial sites (next to MRT stations) to be launched by the Urban Redevelopment Authority for tender submission in 4Q11.
Action & Recommendation
Our DPS forecast is currently based on 100% of EPS estimates (forward yield of 6.4%). Successful tenders for commercial sites are potentially positive catalysts which would be better received given the success of Clementi Mall. Reiterate BUY.
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