Price at 15 Jul 2013 (SGD) 4.33
Price target - 12mth (SGD) 4.09
52-week range (SGD) 4.65 - 3.93
9M13 boosted by new accounting policy but operationally subdued
9M13 flattered by new accounting policy; Hold on lower S$4.09 TP
SPH's 9M13 was boosted by a S$111m gain as the company transitioned to fair value accounting for its investment properties (from cost model). This caused a 22% jump in 9M13 reported NPAT to S$358m. Excluding the fair value gain, we estimate 9M13 underlying NPAT fell 16% YoY. We raise FY13e reported NPAT to reflect the accounting change but lower FY14-15e forecasts to reflect weakness in the core media business. Near-term share price will likely be supported by anticipation for the special dividend, Hold.
Underlying operational performance fairly weak
SPH’s 9M13 reflected sustained pressure in the core media business, with newspaper and magazine revenues falling 4.2% YoY to S$747m. This was exacerbated by a 15.2% YoY reduction in other revenues due to weakness in the book publishing business and timing of exhibitions. Hence, despite a 3.5% property revenue gain, SPH’s 9M13 total revenues were down 3.5% YoY to S$929m. 9M13 EBITDA margin compressed to 38.1% (vs 9M12’s 41.9%), partly reflecting a S$15.6m impairment charge on an overseas magazine subsidiary. As such, 9M13 EBITDA plunged 12% YoY to S$354m. Excluding the impairment, we estimate the underlying EBITDA would have dropped 8%.
Forecasts adjusted to reflect new accounting policy and weakness in media
We cut FY13-15e advertising revenues by 6-7%, reflecting the near-term effects of cooling measures in the property and automobile segments while the impact of structural migration to online platforms will become increasingly pronounced over time. We also tweak our forecasts to take into consideration SPH’s new fair value accounting policy for investment properties and include impairment charges reported in 3Q13. On balance, our FY13e reported NPAT forecast is raised by 7% but we reduce FY14-15e NPAT by 11-12%.
SPH’s implied core media valuation at premium to peers; risk of LT de-rating
We now value the property assets at fair value (vs previous 10% discount) while we include cash and investments as at end 3Q13. At c.12x, SPH’s implied core media EV/EBITDA continues to represent a premium over peers, buoyed by relative resilience of its print advertising business to digitization so far. But this premium could narrow over time as the negative impact of digitization becomes increasingly pronounced over the long-run. (For details on SOTP valuation, see p.6.) Key risks include adex and M&A.
Source/Extract/Excerpts/来源/转贴/摘录: Deutsche Bank
Publish date: 16/07/13