SPH net profit sinks 11.5% YoY

But the S$99.8-m decline sees hope in the growing rental income.

According to DBS Vickers, headline net profit fell 11.5% y-o-y to S$99.8m, slightly below our expectations, largely due to lower investment income (S$9.5m, -60%) and higher staff costs (S$94m, -6%) as a result of bonus provisions.

Here's more from DBS:

Growing rental income is key to growing volatility in media sector. We see SPH’s growing rental income as a key bulwark against potential volatility in ad spend and weakening circulation. The property segment now contributes 15% of revenues (13% last year) and 22% of profit before tax (14% last year).

In contrast, newspaper and magazine’s PBT declined from S$95.7m to S$91.6m. The property segment has therefore become increasingly important in mitigating earnings volatility in the media segment, even as GDP expectations for Singapore this year are not expected to outpace last year.

Earnings growth likely to be muted, in line with Singapore’s cautious GDP growth expectations. Our DBS economist is forecasting GDP growth at 3.5% vs 4.9% last year. Since ad spend correlates well with Singapore’s GDP growth, we remain conservative over such growth in the coming quarters. We have imputed 2% growth in Ad Ex in FY13F, a marginal growth from our forecast of a 0% growth in FY12F.