SPH’s 2QFY19 results came in below our expectations. Operating revenue fell 4.4% YoY, due mainly to a 16% drop in print advertisement revenue and a 8.8% YoY fall in circulation revenue, offset however by rental revenue of S$6.2m from the UK student accommodation portfolio and S$3.2m from Figtree Grove Shopping Centre in Australia. These assets also contributed to a rise of 16.8% and 35.5% YoY in premises costs and finance costs, respectively.

Accounting for one-offs, core PATMI came in at S$29.7m, comprising 13.4% of our full-year forecast (2QFY18: 18.6% of FY18 core PATMI). In Feb-Mar’19, the group has inducted assets yielding 380 beds to its UK purpose-built student accommodation portfolio; meaningful contribution should only be seen from 3QFY19 onwards.

The group has declared a lower interim 1HFY19 DPS of 5.5 S-cents (1HFY18: 6.0 Scents). We maintain our HOLD rating but place our FV estimate of S$2.55 under review.

Source: OCBC Research - 10 Apr 2019