Friday, August 23, 2013

Singapore Press Holdings Ltd : Is there light at the end of the tunnel for media?

22/8/2013 – Analysts say while the core business of Singapore Press Holdings is expected to remain muted, its REIT portfolio will offer some stability.

According to a Reuters survey, 6 analysts have a SELL call and 8 a HOLD call, with only 1 BUY and 2 OUTPERFORM recommendations.

Price targets vary from a low of S$3.50 to a high of S$4.99.

The company reported these financial results for Q3 FY13 on July 15:


Revenue: -2.1% YoY to S$329.1 mln
Net Profit: +80.7% YoY to S$187.5 mln, includes S$111.4 mln property gain
Cash flow from operations: (S$7.9 mln) vs (S$4.9 mln)
Cash Reserves: S$348.6 mln as at May 31
Final Dividend: 18 cents vs 7 cents

Analysts surveyed by Reuters have an average HOLD call with a price target of S$4.20.

The company's recently-launched REIT should bring in stable income as its core business of publishing is expected to stay muted with government cooling measures impacting property ad revenues.

Bullish analyst report
Bullish analyst report

Maybank Kim Eng Research has downgraded its call to HOLD with a price target for S$4.50, previously S$4.52.

The catalysts for this re-rating include a prolonged weak core business, depressed advertising revenue and a gain from its property portfolio.

In the results, the company's 80.7% net profit spurt to S$187.5 mln for Q3 FY13 is derived from a change in accounting policy, which brought in a S$111.4 mln fair value gain on investment properties.

Exclude this property gain and factor in the impairment loss of S$15.6 mln on an overseas magazine subsidiary, core net profit would stand at just S$91.7 mln (-12% YoY).

Maybank says the REIT spinoff has largely been factored into the share price already, while the core media business could continue to be under pressure.

Advertising revenue, comprising 60% of total revenue, could remain weak since cooling measure on the property and automotive sectors were announced by the government in January.

SPH's revenue from ads has otherwise been hit for the latest two quarters, down around 4.5% each quarter.

The still-weak economic outlook for Singapore, especially with property cooled, could keep the advertising segment flattish.

Property advertising revenue is the greatest contributor to SPH's ad earnings.

Also, the current 5.5% dividend yield would be less attractive as well, as government bond yields rise.

Bearish analyst report
Bearish analyst report

OSK-DMG Research maintains its SELL call with a price target of S$4.00.

It picks up the same points about the one-off items and their impact on profit, and adds that its outlook for the print business is muted with the government's moderate GDP expectations.

These were revised to 2.5% to 3.5% since the analyst wrote the report, up from the earlier forecast of 1%-3% for 2013.

More points from the SWOT analysis: weakness lies in the decline of print circulation which has been in this trend for the past ten years.

Also, ad revenue remains reliant on the strength of the domestic economy.

Newspaper and magazine ad revenue has gone down 4.3% to S$198 mln and circulation revenue also fell 2.3% to S$50.7 mln.

E-substitution of the print newspaper continues to be a threat.

On the bright side, SPH maintains its monopoly in newspaper publishing.

There could be opportunities to acquire online media businesses.

Rental income from investment properties Paragon and Clementi will bring in consistent income.

Investor Central. We keep your investments honest.

Question 1. Which overseas magazine subsidiary was impaired, and why?

Question 2. What is being done to fix this situation?

Question 3. What needs to happen for SPH to benefit from falling paper circulation and e-substitution?

Question 4. What lies at the heart of the digital media malaise? Is the monetisation of the platform the problem, or the content?

SPH has declined to reply to these questions.

Key financial ratios
Key ratios
The ticks and crosses below indicate whether the stock meets the following value investing criteria.
Price-book: 3.2x - "Price is what you pay, value is what you get" - Are you getting more than you pay for?
Yield: 5.6% - Does the stock pay a risk premium over fixed deposit rates?
Cashflow: -S$7.85 mln - "Profit is opinion, cash is fact" - Is the company generating cash?
Total cash & equivalents: S$348.6 mln - Does the company have cash?
Source: Reuters
Management: Singapore Press Holdings Ltd was ranked 15th in the Governance & Transparency Index, with a score of 83 points.

Major shareholder(s):
22.60% - The Great Eastern Life Assurance Co Ltd
16.80% - Oversea-Chinese Banking Corporation Ltd
16.35% - NTUC Income Insurance Cooperative Limited
13.30% - Singapore Telecommunications Limited
9.50% - The Development Bank of Singapore Ltd

Consensus recommendation
Analyst survey by Reuters
Consensus call: UNDERPERFORM
Price target: S$3.53


Source/Extract/Excerpts/来源/转贴/摘录: InvestorCentral,
Publish date: 22/08/13

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