Singapore Press Holdings Limited - Advertising Revenue Contraction Appears To Be Tapering Off

SPH’s advertising revenue contraction appears to be tapering off. Our page monitor of The Straits Times points to an adspend contraction of 2% yoy in 3QFY15 (2QFY15: Reported -9% yoy). While we do not see any near-term share price catalysts, the annual dividend yield of 4.4% remains decent

Maintain HOLD. Target price: S$4.20. Entry price: S$4.00 and below.

WHAT’S NEW
Advertising revenue contraction is tapering off. Singapore Press Holdings’ (SPH) advertising revenue (AR) contraction appears to be tapering off. Our monthly page monitor of The Straits Times suggests advertising spending (adspend) contracted by 2% yoy in 3QFY15 (Feb-May 15) vs a reported advertising revenue contraction 9% yoy in 2QFY15. This contraction is less than 1QFY15’s -9% yoy. 

SPH had earlier attributed 2QFY15’s weak AR to advertisers’ reluctance to step up spending in view of: 
a) weak domestic spending given the locals’ high propensity to travel and spend overseas and ecommerce,

 b) lower PRC arrivals and thus consumer spending on luxury goods, and 

c) lower Indonesian and Malaysian arrivals. Tourist arrivals contracted by 4% yoy in 2QFY15. We are maintaining our projected AR contraction of 3% for FY15.

STOCK IMPACT
Flat share price but dividend yield is decent. SPH’s print revenue is expected to perform in tandem with Singapore’s muted GDP growth which is projected at 3.3% for 2015. Traditionally, the share price has had a good correlation with domestic economic growth. The share price is expected to be flat, but annual dividend yields of 4.4% for FY15-17 are decent amid a low interest-rate environment.

Focus is on property initiatives. As the media business remains a mature business, we expect SPH to rein in costs and intensify its search for new business initiatives. Seletar Mall – a 70:30 JV between SPH and United Engineers – obtained Temporary Occupation Permit (TOP) on 28 Oct 14 and opened its doors to shoppers on 28 Nov 14. The fourstorey family-oriented mall houses more than 130 brands and has a diverse mix of anchor tenants including premium supermarket FairPrice Finest, cineplex Shaw Theatres, food court Foodfare, Japanese casual clothing company UNIQLO, ladies-only fitness centre Amore Fitness & Boutique Spa and department store BHG. Given that the media business remains as a mature business, we expect SPH to rein in costs and intensify its search for new business initiatives.

EARNINGS REVISION/RISK
No change in our earnings forecasts. Weak AR remains as a key risk.


Technical Analysis
Daily Chart
VALUATION/RECOMMENDATION
Maintain HOLD. Our target price of S$4.20 is based on a SOTP valuation. Our recommended entry price is S$4.00 and below.

SHARE PRICE CATALYST
Share price catalysts are lacking. Traditionally, the share price has had a good correlation to advertising revenue growth and hence, our monthly page-counts. (Read Report)

Source : UOB KayHian Research

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