SPH

SPH: 1Q15 results showed weaknesses that are within expectations. Profits slipped 21.9% y/y to $69.4m, making up 22% of full-year forecast. Revenue slipped 6.5% to $307.1m, mostly the result of 7.9% decline in main business segment, newspaper and magazine, to $235.7m as contribution from both advertisement and circulation declined. Costs were mostly in control. Direct costs of materials, production and distribution fell 13.0%, more than the decrease in revenue, but staff costs increased 2% in order to retain employees in tight labour market environment. Investment income shrank on fair value losses on forward hedges and portfolio investments, and losses from associates in regional online classified businesses multiplied. In fact, SPH REIT was the only bright spot. Looking ahead, its core media business is likely to languish further and growth profile will remain unexciting unless SPH reinvents its online and mobile platform and its other businesses. New contribution from Seletar Mall is anticipated, but unlikely to fully offset declines in the media segment. Maybank-KE maintains Hold with TP $4.10