3 culprits to SPH's disappointing 10% recurring earnings dive

It's a triple whammy.

According to CIMB, the decline in recurring earnings this quarter was mostly due to a drop in other revenues. The firm thinks dividends will remain intact as we expect robust property income to offset weak advertising revenues.

Overall earnings declined 7%. The rise in investment income in the absence of forex losses slightly cushioned against the fall in recurring earnings.

Here's more from CIMB:

Recurring earnings declined 10% yoy due to a combination of: 1) a 34% yoy decline in other revenues. This can be attributed to the difference in timing of the Comex exhibition this year; 2) a 2% decline in ad revenues; and 3) flat expenses – lower newsprint charge out rates (-8% yoy) were offset by higher promotional activities (+15% yoy) attributable to the online business.

Other revenues should pick up later this year but overall revenue growth is likely to be capped on the back of weak ad revenues. The dismal economic outlook and a slew of tightening measures for the property sector should see this trend continue.

We expect rental income to offset and decline in ad revenues. Paragon, again, saw positive rental reversions (+2.9% yoy), while rates at Clementi Mall remained stable. Rentals from Clementi Mall are likely to stay flat this year as the first cycle of rental reversions should come in FY15.

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