SINGAPORE (Oct 12): Singapore Press Holdings is hastening its restructuring plans, amid a 13% decline in revenue from its core media business in FY2017.
At its results announcement on Wednesday, new CEO Ng Yat Chung confirmed that SPH will bring forward the planned 2018 deadline and complete the full 10% staff reduction by the end of this year.
The final round of cuts will see some 230 employees retrenched, with SPH expecting to incur about $13 million of retrenchment costs in 1Q18.
“[SPH’s] staff cost reductions leave nothing sacred,” says UOB KayHian lead analyst Foo Zhi Wei in a Thursday report, noting that the retrenchments will include staff from the media company’s newsroom and sales operations.
According to Foo’s estimates, this will lower SPH’s staff costs by 4-5% in FY2018.
However, CIMB Research Ngoh Yi Sin opines that the cuts do little besides leaving behind a “battered morale [and] weak sentiment”.
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“We see little relief from these cost savings as management plans to continue to step up its investments in enhancing the capabilities of its systems and workforce,” Ngoh says in a Thursday report. “Rising newsprint prices would also weigh on its overall profitability.”
As such, Ngoh is keeping CIMB’s “reduce” call on SPH with an unchanged target price of $2.38.
Meanwhile, UOB’s Foo is downgrading SPH to “sell” and slashing its target price to $2.38, from $2.85 previously.
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“Little positive catalysts exist for the stock in the near to medium term aside from a possible bottoming out in media earnings post-restructure,” says Foo.
SPH after market close on Wednesday reported an 8.2% decline in group operating revenue to $1.03 billion for the full year ended August, led by a continued decline in revenue from its core media business.
Media revenue fell 13% to $725.4 million in FY2017, with advertising and circulation revenues shrinking by 16.9% and 5.1%, respectively.
See: SPH full-year earnings up 32% to $350.1 mil on one-off gains; revenue down 8.2%
To make matters worse, SPH is starting to lose its shine as a dividend play.
“The key attraction to SPH’s share has been its high dividend. However, the sharp cut to the final dividend possibly signals an unwillingness to maintain the high dividend payout of yesteryears,” says Foo. “SPH is starting to look less attractive as a yield play and share price is likely to suffer a knee-jerk reaction.”
SPH has proposed a final dividend of 9 cents per share for FY2017, comprising a normal dividend of 3 cents per share and a special dividend of 6 cents per share. Together with the interim dividend of 6 cents, this brings total dividend payout for FY2017 to 15 cents.
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Ngoh says the FY2017 DPS of 15 cents is below expectations, and notes that it is SPH’s fifth consecutive dividend cut.
“We also think special dividends from the spin-off of Seletar Mall into SPH REIT is unlikely in the near-term,” she adds.
See: Acquisition of Seletar Mall could spur steady SPH REIT
As at 2.18pm, shares in SPH are trading 3 cents higher at $2.72 or 18.2 times FY17 earnings with a dividend yield of 5.6%.
