Towards Financial Freedom
Valuations Stretched; Downgrade To Sell
2QFY13 results came in slightly below our expectations with PATMI at SGD72m (-15% y-o-y, -22% q-o-q). A 7.6% y-o-y fall in N&M ad revenue was partially cushioned by a 4.5% y-o-y increase in property rental income. We lower our FY13/14 earnings by 5.8/6.0% on weaker domesticeconomic outlook, which impact ad revenue. Downgrade to SELL with lower SOTP TP of SGD4.00 (SGD4.30 previously).
- Share price enjoyed a great run up but valuations appear stretched. SPH's share price ran up some 10% since it announced an exploration ofa REIT listing on the SGX. Though we understand there are advantages of a REIT spin off, such as potential cash inflows, we think valuations appear stretched. With an unexciting core publishing segment, and FY13 dividend yields compressing to 5.2%, we are downgrading our call to SELL.
- Feasibility of a REIT listing would depend on how cash is deployed. SPH is still in the early stages of studying a REIT spin off possibility and we think visibility on any positive catalysts are lacking at this point in time.We think a key point that needs to be addressed would be whether SPH will be able to make yield accretive investments with the use of proceeds.
- Ad revenue weak but property segment held the fort. Property segment income continued to enjoy 4.5% y-o-y growth to SGD50.2m due to higher rental rates from Paragon but this was more than offset by a 7.1% y-o-y fall in Newspaper and Magazine segment revenue to SGD224.4m. Following weaker-than-expected 1Q13 Singapore GDP contraction (based on advanced estimates) of 0.6%, we have consequently lowered our FY13 earnings by 5.8% to reflect weaker ad spend going forward.
- Downgrade to SELL, yields looking less attractive. We value the core media segment based on 13.8x FY13 P/E, Paragon (SGD2.43bn) and Clementi Mall (SGD359m) at market value, M1 and Starhub at OSK TP and investments as at Feb 13. SPH has declared an interim dividend of SGD7¢ a share. We think SPH looks less attractive with FY13 yields at 5.2%.
SWOT Analysis
Source: OSK
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
