OCBC Report 14 Apr 14

KEY IDEA Telco Sector – M1 may offer cross carriage soon Summary: Business Times reported yesterday that M1 could be close to being able to cross carry the coveted BPL and other exclusive content on its fledging MiBox. However, we do not expect the latest development to have much of an impact on the Pay TV market here in the near term. For one, its market share (10k) is hardly significant compared to StarHub’s 533k and SingTel’s 418k subscribers (as of end 2013). Secondly, any revenue from cross carriage will flow back to the exclusive content owner. In the case of both BPL and the 2014 World Cup, that would be SingTel. Last but not least, the main hurdle may be the steep pricing of the sports content itself, which may put it out of reach for the “casual” sports viewer. We continue to maintain our NEUTRAL rating on the sector and choose SingTel (BUY, S$3.74 FV) as our top pick. (Carey Wong) MORE REPORTS Ezra Holdings: Expect a better 2H Ezra Holdings reported a 22% YoY rise in revenue to US$300.4m and a 34% fall in net profit to US$19.6m in 2QFY14, such that 1HFY14 revenue and net profit formed 48% and 59% of our estimates, respectively. However, we note that earnings in 2QFY14 were boosted by a US$16.6m gain on disposal from one of its associated companies EOC. Adjusting for this, we estimate core net profit to be about US$3m in the quarter and US$9.7m in 1HFY14, with the latter forming 28% of our FY14 core estimates. Nevertheless, we expect 2HFY14 to improve sequentially, in line with management’s guidance. This would be driven by a recovery in its Offshore Support Services Division and continued traction in its Subsea Services Division. Hence, we are keeping our forecasts intact. Rolling forward our valuations to 0.9x blended FY14/15F P/NTA, we derive a slightly higher fair value estimate of S$1.05 (prev. S$1.03). Upgrade Ezra to HOLD.  (Low Pei Han and Andy Wong) Singapore Press Holdings: Decline in ad revenue accelerates 2QFY14 operating income came in at S$53.5m, down 36.8% YoY, mostly due to lower ad contributions, staff costs rising 18.2% (S$15.6m) and a S$9.9m impairment charge. The latter two were related to the cost-saving initiatives implemented last year as management restructured the framework for staff compensation and also optimized printing capacity with the removal of a press line. For the quarter, the group also recognized a S$52.9m one-time gain for the partial divestment of 701Search to Telenor, which resulted in PATMI increasing 7.5% YoY to S$81.3m. Overall, we judge 2Q numbers to be a miss; ad contributions was below expectations and we revise our FY14 operating income forecast down by 16.5% to S$322.7m, after incorporating 2Q’s one-time items as well. Management declared an interim dividend of 7 S-cents. We update our valuation model for weaker print assumptions and latest valuations for listing holdings, and our fair value dips marginally to S$4.13 from S$4.14 previously. Maintain HOLD. (Eli Lee)