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Nikkei Markets

Singapore Press Holdings loses advertisers and investors

Once-mighty media company now gets bulk of earnings from property

SINGAPORE (Nikkei Markets) -- Investor interest in Singapore Press Holdings is set to cool further after the company posted a drop in earnings and cut its dividend once again, underlining its struggle to find direction outside its core business.

Once a sought-after stock due to its substantial dividend, SPH has seen its star fade as advertisers and subscribers moved online and away from traditional newspapers and magazines. While the media operations still account for 60% of SPH's operating revenue, about two-thirds of profit now comes from property.

The city-state's dominant publisher, SPH has more than 50 titles under its umbrella, including the Straits Times, the English-language daily that is the largest by circulation. It also owns the country's three Chinese language papers.

In a bid to diversify its revenue streams, SPH has forayed into several business, such as providing services for the elderly and selling wine to newspaper subscribers. The company, together with conglomerate Keppel Corp., recently took over mobile phone operator M1.

However, the diversification attempts have yielded mixed results even as the pressure on its media business has intensified.

On Tuesday, the company said net profit for the quarter ended February plunged 25.7% to 29.7 million Singapore dollars ($21.9 million), dragged by lower media revenue and fair value losses on investment properties. The result was well below the S$52.95 million consensus estimate of analysts polled by Refinitiv.

SPH announced an interim dividend of 5.5 Singapore cents per share, a cut from 6.0 Singapore cents in the year-ago period. Between 2014 and the latest financial year ended last August, its annual dividend has fallen 38%.

By midday Wednesday, shares of SPH were down 2.4% at S$2.47, bucking the trend in the benchmark Straits Times Index, which was slightly higher. OCBC Investment Research kept its "hold" rating on SPH shares after the results but said it would review its fair value estimate of S$2.55.

"The main draw of SPH has always been its yield. But now, you are able to get other blue chips which offer equivalent yields and better earnings quality," said Terence Wong, CEO of fund management company Azure Capital.

While still part of Singapore's benchmark stock index, SPH's market capitalization of around S$4 billion is far smaller than other, more diversified property groups on the index such as CapitaLand and City Developments. Its dividend yield, at 3.6%, is lower than what blue chips such as Singapore Telecommunications and DBS Group offer.

According to data from Bloomberg, SPH is now covered by just six analysts, down from 17 at the start of 2014.

In its press release late Tuesday, SPH said the 10.1% decline in media revenue to S$296.2 million in the six months to February was partly due to the shorter festive advertising window between Christmas and Chinese New Year. This year's festivities began on Feb. 5, while in 2018 they started on Feb. 16.

It added that its digital business continued to show encouraging growth with newspaper digital ad revenue rising 15.1% compared with a year ago.

In the property segment, SPH REIT, which is 70% owned by SPH, made its first overseas foray in December with the acquisition of Figtree Grove Shopping Centre in Wollongong, Australia, for 206 million Australian dollars ($146.5 million).

SPH also expanded its U.K. student accommodation portfolio by over 10% with the addition of 380 beds in February and March.

Looking ahead, the company said it would continue to grow its U.K. student accommodation business through acquisitions, while its aged-care business remains on the lookout for expansion opportunities.

SPH owns Orange Valley Healthcare, which operates the largest chain of nursing homes for the elderly in Singapore.

--Kevin Lim

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