Singapore Press Holdings’ revenue rise 7.6% to S$315.6m in 4Q11

Lowering FY12 forecast

4Q11 results below expectations. SPH reported 4Q11 PATMI of S$96.1m which was up 27.6% YoY mostly due to the added contributions from Clementi Mall's rental income. 4Q11 revenues came in at S$315.6m which was 7.6% higher than last year. While 4Q11 revenue hit close to our S$313.7m forecast, PATMI came in 13% below forecast mainly because of an unexpected S$10.2m increase in 'other operating expenses' from starting operations at Clementi Mall, and lower than expected income from investments.

Lowering FY12 numbers. FY11 earnings from the Newspaper and Magazine segment was flat YoY at S$365.6m as a 4.5% YoY increase in ad revenues was mostly nullified by increases in newsprint and staff costs. The property segment earnings fell 68% YoY to S$75.6 due to the end of contributions from Sky@eleven last year. Looking forward to FY12, we adjust our PATMI estimates down by 15% to S$372.9m as we expect both classified and display ad earnings to be hit in a weaker macroeconomic environment while the exhibitions business would likely face headwinds as well.

Management looking to stable dividends. Management declared a final dividend of 9 cents and a special dividend of 8 cents, bringing total FY11 dividends to 24 cents. While a 24 cents dividend is lower than that in FY10 (27 cents), we note management is paying out 98% of earnings versus 86% last year. This indicates, in our view, that management is cognizant of SPH's attractiveness as a dividend stock and would pay out more in leaner years to reduce dividend volatility. We expect
management to similarly pay out almost 100% of earnings in FY12-13 and distribute 23 cents dividends in both years.

Write-down risks from investments. SPH currently has ~S$1.3bn of investible funds of which an estimated 77.6% are in equities, bonds and investment funds. These include stakes in listed telcos such as M1 and Starhub and REITs such as A-REIT and Suntec REIT. While these are fairly defensive sectors, write-downs would be likely in a bear scenario. Our forecast does not incorporate investment write-downs currently and we note that non-cash write-downs also would not affect SPH's ability to sustain its dividends.

Maintain HOLD at a reduced S$3.99 FV. With a 6.3% dividend yield, we believe that the downside for SPH is limited at this juncture. We expect earnings to face headwinds in FY12 as ad revenues decline in a slowing economy with support from mall rental income. Maintain HOLD with a reduced fair value estimate of S$3.99 versus S$4.19 previously.