SPH's property business will help cushion the blow of weak ads: analyst

Net property income rose 3.1% to $179.4m.

While headwinds from media business will pose significant challenges ahead, SPH's property portfolio will buttress earnings to an extent, said OCBC Investment research.

FY16 net property income grew 3.1% to S$179.4m and the brokerage firm said there were improved performances in all three malls.

SPH REIT comprises Paragon, a premier upscale retail mall and medical suite/office property in Orchard Road and The Clementi Mall, a mid-market suburban mall in the centre of Clementi town. The Seletar Mall, located in Sengkang, is SPH's latest retail development.

The group continued to see falling ad demand over the latest quarter.

Total newspaper ad revenues dipped 12.5% yoy in 4QFY16 as classified and display figures both declined 14.4% and 8.6% yoy, respectively.

On the bright side, OCBC notes that the management’s focus on cost management and operating efficiency has proved to be fairly successful as total costs declined for a third consecutive year.

"Excluding impairment charges, we note that operating expenditure fell S$22.6m or 2.7% YoY. Staff costs have also been held in check with headcount and expenditure decreasing 1.3% and 2.4% respectively," it said.

Looking ahead to FY17, management expects conditions to remain difficult given the uncertain economic outlook and the continuing disruption of the media industry.

Over the last quarter, SPH began a comprehensive review of its core media business with the twin goals of sustaining the media business and pursuing growth opportunities.

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