• Ad revenues continue downtrend
• Increasing newspaper prices
• Pty contributions remain firm

Unabated pressure on the media topline

Singapore Press Holdings (SPH) reported that its 2QFY16 PATMI decreased 19.6% YoY to S$63.8m mostly due to lower revenues from its media segment, weaker net income from investments and lower share of results of associates due to the absence of a S$7.4m restructuring gain booked in the corresponding quarter last year; partially offset by lower materials, production and distributions costs, staff costs, finance costs and other operating expenses.

In terms of the topline, 2QFY16 revenues dipped marginally from S$275.4m a year ago to S$259.3m. Unsurprisingly, we saw continued pressure on the media segment topline which fell 6.0% to S$190.7m in the latest quarter, while property and other revenues partially offset this with 0.9% and 9.5% YoY growth to S$61.1m and S$7.5m, respectively.

Overall, we deem this quarter’s results to be broadly within expectations. SPH declared an interim dividend of 7.0 S-cents, which was unchanged from last year and similarly within expectations.

Rolling out increases in newspaper cover prices

The advertising market remained soft over the latest quarter, with total newspaper ad revenue down 8.4% YoY (display ad revenues down 7.6% and classified down 9.9%). In 1H16, management had focused on keeping costs low and this has yielded results.

Newsprint costs, staff costs and other materials, production and distribution costs all fell 10.7%, 4.9% and 1.9%, respectively. We understand that management is rolling out increases in newspaper cover prices; this is expected to marginally boost circulation revenues which currently constitutes 14.6% of 1H16 operating revenues of S$555.5m.

In the property segment, 1H16 net property income grew 8.2% to S$88.7m, boosted by Seletar Mall which commenced business in Nov 2014 and higher rental income from Paragon and The Clementi Mall. Maintain HOLD with an unchanged fair value estimate of S$3.78.

Source: OCBC Research - 13 Apr 2016