SPH

SPH’s FY8/15 results were above expectations although net profit tumbled 20.4% y/y to $321.7m, largely hurt by lower fair value gains and decline in advertising revenue.

Revenue dipped 3.1% to $1.18b, mainly weigh down by media (-6.3% to $902.5m) and other (-6.4% to $43.8m) segments, but partially cushioned by the property division (+12.6% to $230.8m).

The media segment saw a drop in advertising (-7.4%) and circulation revenue (-5.4%) as it was hit by a faltering economy in Singapore and the digitisation trend within the industry.

Its property business was however boosted by contribution from The Seletar Mall, which opened its doors in Nov ’14, and higher rental income from Paragon and The Clementi Mall.

Notwithstanding the weaker top line, operating profit inched up 1.3% and margin expanded 1.7ppt to 30.0%, pre-dominantly helped by a reduction in newsprint, utility & production cost and depreciation expenses, as well as a surge in other operating income (+73.9%) from corporate events, write-backs and gain on dilution of interest in an associate.

However, bottom line took a beating from markedly lower fair value gains in SPH REITs’ retail assets (-66.8%) and the absence of a partial JV divestment gains ($52.9m) realised last year.

Consequently, it declared a lower year end DPS of 13¢ (final: 8¢, special: 5¢), bringing full year payout to 20¢ (FY14: 21¢).

Moving forward, management guided a low risk-return profile for investors, as they will maintain a conservative stance and focus on capital preservation amid the challenging operating environment in FY16.

Nevertheless, management also revealed that more efforts will be channelled to grow its digital media initiatives, and explore growth opportunities for its retail property business.

SPH is currently trading at 21.6x consensus FY8/16e P/E and 1.8x P.B, with an dividend yield of 5.1%.

Latest broker ratings:
UOB Kay Hian maintains Hold with a TP of $4.10
Credit Suisse maintains Hold with a TP of $4.00
JP Morgan maintains Neutral with a TP of $4.00
OCBC maintains Hold with a TP of $3.78
HSBC maintains Hold with a TP of $3.60
CIMB maintains Reduce with a TP of $3.85