SPH ad revenue slump will bottom out in FY13

As the Singapore economy recovers so will the ad placements, says Maybank.

Here's more from Maybank Kim Eng:

Results in line. SPH announced its FY8/12 results, which were broadly in line with market expectations. Top line registered a 1.8% yoy growth to SGD1.27b, driven by strong performance from the Property segment (+14% yoy) despite marginally decline from Newspaper & Magazine segment (-1% yoy). Core earnings increased by 0.3% yoy.

Expecting improved core ad business going forward. SPH’s core print advertisement revenue dropped by 1% yoy in FY12 due to weak economy condition. However the advertising demand for property, fashion and automobile sector remains strong. We expect ad revenue to bottom out in FY13 in line with recovery in Singapore economy.

Property segment to support future growth. SPH’s property segment will be the main growth engine for the whole group in our view. In FY12, rental income rose by SGD23.5m (+12.8%) to SGD191.4m. This was driven by higher rental rate in Paragon as well as contribution from full operation of Clementi Mall. As Clementi Mall has not achieved its maximum rental rate and demand in Orchard Road remains robust, we believe there is still upside from property rental income for FY13.

Operating margin sustained at a healthy 32%. Cost was wellmanaged in FY12, only marginally increased by 2.5% yoy, thanks to low newsprint cost and low interest rate. Operating profit margin remained above 30% level and we are confident that 30% OP margin is sustainable going forward.

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