SPH’s 2QFY18 results were broadly in-line with our expectations, with operating revenue registering a 1.8% YoY decrease to S$233.7m. Revenue for the group’s media business fell by 7.4% YoY to S$155.6m, due primarily to advertisement and circulation revenue dropping 9.3% and 7.5%, respectively.

Nonetheless, we note that the decline in print advertisement has been tapering for a while now, and is currently down 11.1% YoY, as compared to -21.5% YoY in 3QFY17.

The group’s property segment witnessed a revenue drop of 2.4% to S$60.5m on the back of lower rental income from the group’s retail assets.

In terms of 1HFY18, operating revenue stood at S$492.5m, which is ~51% of our full-year forecast. Staff costs for 2QFY18 remained flat YoY, as the staff cost savings from the media segment were partially offset by costs from the aged care business. Other operating expenses saw a bump of 14.6% YoY due partly to higher business promotion costs.

All in, the group’s 2QFY18 PATMI was down 24.9% YoY to S$40.2m. The group has declared an interim dividend of 6 S-cents per share, which is unchanged from the same period last year.

We maintain our HOLD rating, but put our fair value estimate of S$2.51 under review.

Source: OCBC Research - 11 Apr 2018