SPH can't get its hopes up for a bullish growth

Revenue growth will just hit 0%-2%.

According to DBS, 1Q13 is slower than expected. 1Q13 net profit dropped by 6.6% y-o-y to S$91.1m, on the back of a 3.1% drop in revenue to S$322.1m and higher operating expenses to S$210.5m (+1.8% y-o-y).

Ad revenues dip on uncertain economic outlook. Revenue from Newspaper and Magazine businesses dipped to S$263.5m (-2.3% y-o-y) on weaker advertisement revenue (S$204.8m, -2%) and circulation revenue (S$49m, -2.6%). Rental income, however, increased marginally to S$49m (+2.9%) on the back of higher rentals from Paragon.

Staff costs inched up 0.8% higher on salary increments, partially offset by lower bonus provisions, while newsprint costs were S$2m lower as charge-out rates fell to US$644/mt from US$691/mt a year ago. Other operating expenses also increased by 15.4% to S$32.9m on increases in promotional activities and online businesses.

Here's more from DBS:

Earnings growth to remain muted. Along with the muted domestic growth outlook, we expect SPH growth to remain lackluster. DBS economist expects GDP to grow by 1.6% and 3.2% for 2012 and 2013, respectively.

With this, we expect print revenues to be weighed down by the muted economic outlook and expect 0%/2% ad revenue growth in FY13F/14F. Fortunately, growth should be supported by stable contribution from its property rental income.

Property rental to grow in importance. We continue to see SPH growing rental income as a key buffer for the group’s softening advertising and circulation revenue. Property rental now accounts for 15% and 21.7% of the group’s revenue and PBT in 1Q, respectively, up from 14% and 19.7% a year ago.

This should be further increased with the expected completion of Seletar Mall at the end of 2014.