SINGAPORE (Dec 5): UOB Kay Hian is maintaining its “sell” call on Singapore Press Holdings (SPH) while raising its target price on the stock to $2.42 from $2.38 previously to incorporate MindChamps into its valuations.
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In a Tuesday report, lead analyst Foo Zhi Wei explains that a 10% discount has been applied to the sum-of-the-parts (SOTP) valuation due to the uncertainty of SPH’s dividend payout.
A downside risk exists against the current consensus dividend payout, he adds, given how its 4-5 cents of current estimates for a 13-cent payout in FY18 will likely have to arise from divestment gains of at least $100 million.
“SPH saw its pagecount decline by 14% y-o-y for 1Q18. This is the sharpest decline ever seen for 1Q, which has historically been one of its stronger quarters, and was comparable to the weakness seen in 3Q17,” observes Foo.
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See: SPH 1Q earnings down 44% to $46 mil
Noting double-digit declines across all segments over the first quarter, Foo sees sharp revenue weakness of a 10% y-o-y decline and a generally grim outlook over the rest of FY18.
As such, the analyst has made no changes to earnings estimates given how current data points show UOB’s assumptions to be on track – but warns of a potential 8% downward revision to current FY18 estimates of $210 million in earnings should page count continue to decline in the coming quarters, which translates to a fall in forward dividend yield to 4.3% from 4.7%.
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“1Q typically sets the tone for SPH’s pagecount for the rest of the year. While 3Q has historically been the strongest quarter, the variance against 1Q has been around 1%,” says Foo.
As at 10.20am, shares in SPH are trading 1 cent lower at $2.78, or 21.4 times FY18 earnings.
