• S$37.8m of impairment charges
• 3Q17 results below expectations
• Pursuing revenue diversification

3QFY17 PATMI Down 45.2% YoY

SPH announced that its 3QFY17 PATMI declined 45.2% YoY to S$28.9m mainly due to poorer results from its media segment and a sizeable S$37.8m impairment charge related to the magazine business. Excluding the impairment charge, we note that group recurring earnings would have fallen by S$17.1m or 19.2% and deem this quarter’s results to have missed our expectations.

In terms of the topline, group operating revenues similarly fell 10.8% YoY due to weaker numbers from the media business which continues to face headwinds from unfavorable market conditions. In particular, we note that media revenues fell by 15.7% YoY as both advertisement and circulation revenues fell 18.7% and 10.6% YoY, respectively.

Investment income for the quarter also fell 37.4% YoY given lower dividend income and weaker fair value gains on hedges for portfolio investments.

Will Actively Pursue Growth Opportunities

Notwithstanding the weak media numbers, the group’s property segment put up fairly stable results with revenues up 2.0% YoY as its retail assets enjoyed higher rental income. SPH continues to exercise discipline on cost controls and we note that, excluding impairment charges, total costs for 3QFY17 came to S$193.6m which is some 6.7% lower YoY.

The management team also indicated that they are actively pursuing growth opportunities to diversify revenue streams with their recent acquisition of Orange Valley Healthcare and the recent winning tender for a mixed site at Bidadari with JV partner Kajima Development Pte Ltd.

In addition, SPH has completed the sale of 701Search on 30 June 2017 and expects to recognize a profit of c.S$150m from the divestment in the next quarter. Given the latest set of weak results, our fair value estimate slips to S$3.25. Maintain HOLD.

Source: OCBC Research - 17 Jul 2017