Singapore Press Holdings (SPH)

[KopiKat]

January 10, 2012, 6.46 pm (Singapore time)

SPH reports 4.7% slip in Q1 net profit

By JAMIE LEE

Singapore Press Holdings (SPH) on Tuesday posted a 4.7 per cent drop in net profit to $97.5 million for the first quarter ended November 30, 2011 compared to the same period a year ago.

Group recurring earnings for the first quarter was up 4.2 per cent to $121 million. Investment income tumbled 90.3 per cent over the year to $600,000 due to unrealised foreign exchange losses on investments as a result of volatility in the financial markets.

Revenue for the group's newspaper and magazine business fell 1.2 per cent to $262 million over the year.

Print advertising revenue dipped 1.2 per cent to $204 million, while circulation revenue inched down 1.8 per cent to $50.3 million.

Rental income for group was up 27.2 per cent to $46.9 million, with Clementi Mall recording rental income of $9 million in the quarter.

Newsprint costs rose 4.2 per cent, while staff costs were up 1.5 per cent.

Other operating expenses grew 16.1 per cent due to the start of Clementi Mall's operations, and higher overheads from increased business activities and inflationary pressures.

'The outlook for the global economy remains fraught with uncertainties,' said Alan Chan, chief executive officer of SPH.

'The group will strive for a sustained performance in the core newspaper business whilst pursing growth in business adjacencies.'

Shares of SPH closed three cents higher at $3.70 a piece.

http://www.businesstimes.com.sg/sub/late...54,00.html?

[ken]

The weak link appears in its investment, may as well unwind its investments and close this department(if any).

Then, return more dividends to its shareholders.

[axt]

http://www.asiasentinel.com/index.php?op...Itemid=224

SPH to buy South China Morning Post?

[KopiKat]

According to the press release today, "....Investment income fell 90.3% year-on-year to $0.6 million as a result of unrealised foreign exchange losses on investments arising from volatility in the financial markets."
Which currency exchange rate move 90.3% against SGD within one year, i wonder.

http://info.sgx.com/webcoranncatth.nsf/V...10036A04B/$file/PressRelease1QFY12.pdf?openelement

Without looking at the announcement or SPH's numbers, losses from currency exchange can be amplified through the use of options, derivatives and/or leverage.

From CIMB report,

Weaker investment income

1Q12 ad revenue slowed as expected though investment income fell more than anticipated. Its share price could remain supported by decent yields of 6% but we see this balanced by receding ad growth and investment income.


1Q12 core profit is in line at 25% of our FY11 estimate and consensus. Stronger property earnings and lower finance costs made up for weaker print and investment income. We keep our EPS estimates and SOP target price. Maintain Neutral.

Slowdown in ad growth
We expect slower ad revenue in FY12 because of a weakening economy. The slowdown had already been apparent in 1Q12 when newspaper ad revenue fell 4% yoy on weaker display (-3% yoy) and classified (-4% yoy), albeit from a high base in 1Q11. While SPH tried to keep a tight lid on costs (staff and newsprint costs were up 2% and 4% respectively), this was not sufficient. We expect sustained topline weakness and a slight cost reprieve from softening newsprint prices and variable staff costs in the coming quarters.

Investment income succumbed
While risks to its investment portfolio were to be expected given market volatility, SPH surprised with a 90% yoy fall in investment income due to unrealised FX losses on investments. We understand that these were mainly related to forward hedging contracts for both investments and newsprint exposure, stemming from a stronger US$. With continued market volatility and possibly unabated US$ strength, risks remain.

Property only performer
Property was the sole performer as rental revenue grew 27% yoy with the aid of Clementi Mall which had commenced operations in 2QFY11 and higher rental rates at Paragon (+3% yoy). Both are fully leased.

[wsreader]

Since SPH revenue collection is mostly in SGD and newsprint cost is in USD, the newsprint exposure should benefit from a weaker USD whereas a stronger USD is undesirable.
Therefore the FX hedge should be such that it will mitigate the impact of a stronger USD.

According to CIMB's understanding, the unrealised FX losses is stemming from a stronger USD, meaning the hedge against a stronger USD for newsprint exposure was ineffective.

[KopiKat]

The breakdown of the cause of that large drop in Investment Income due to "unrealised foreign exchange losses on investments arising from volatility in the financial markets" extracted from Q1 results (Pg 2/22),

[wrap]
[table=SPH]
Net fair value (loss)/gain of
- Internally-managed assets at fair value through profit or loss
- Derivative financial instruments
Realised (loss)/gain on derivative financial instruments
Net foreign exchange gain/(loss)[/table]
[table=Q112]

(462)
(7,838)
(1,708)
2,621[/table]
[table=Q111]

(398)
392
1,779
(1,729)[/table]
[/wrap]

SPH probably now understands what Warren Buffett meant when he says financial derivatives can be weapons of mass destruction, especially for those who don't know how to manage it well!

[KopiKat]

SPH just submitted the top bid for a Sengkang commercial site. This time ~20% higher than the next bid. Improvement from their 42% higher bid for Clementi Mall

Extracts fm ST,

SPH submits highest bid of $328 million for Sengkang commercial site
Singapore Press Holdings has topped a state land tender exercise for a commercial site in Sengkang with its bid of $328 million.

The $328 million bid works out to $1,156 per square foot per plot ratio (psf ppr) , higher than the $800 psf ppr price market watchers had earlier predicted.

Located at the junction of Sengkang West Avenue and Fernvale Road, the land site measures 94,618 sq ft and can potentially be developed into a landmark commercial development.

The competitive land tender saw a total of 12 developers vying for the plot that sits at the junction of Sengkang West Avenue and Fernvale Road.

Fm HDB,

1 Earth Holdings Pte. Ltd. $328,000,000
2 Alpro Management Services Pte Ltd $272,217,600
3 Mapletree Trustee Pte. Ltd. (As Trustee of Anson Trust) $227,400,000
4 FC Commercial Trustee Pte. Ltd. (As Trustee-manager of Aquamarine Star Trust) $218,608,000
5 Kentish View Pte Ltd $214,777,000
6 Noscom Investments Pte. Ltd. $207,106,106
7 Sim Lian Land Pte Ltd & Sim Lian Development Pte Ltd $188,882,000
8 Mercatus Retail Holdings Pte. Ltd. $186,000,000
9 Guthrie (SKG) Pte. Ltd. and Sun Venture Group Pte. Ltd. $178,800,000
10 Mezzo Development Pte Ltd $168,000,000
11 S. L. Development Pte. Limited $153,280,000
12 Unique Capital Pte. Ltd. $128,303,078

Note: A decision on the award of the tender will be made after the bids have been evaluated. This will be announced at a later date.

[ken]

I am wondering why don't they buy some reits which is trading at a discount to their book value instead of building new malls ?

Maybe they believed building from ground zero adds value.

[KopiKat]

SPH just submitted the top bid for a Sengkang commercial site. This time ~20% higher than the next bid. Improvement from their 42% higher bid for Clementi Mall

Every time they do something like above, this Warren Buffett quote pops up in my mind,

"You should invest in a business that even a fool can run, because someday a fool will."

[Musicwhiz]

The $328 million bid works out to $1,156 per square foot per plot ratio (psf ppr) , higher than the $800 psf ppr price market watchers had earlier predicted.

I guess this statement already says it all - SPH are over-paying for this purchase? More debt financing for their property projects?