OUTPERFORM: CIMB-GK Research - Jan 14, 2009 (BT)

BackJan 14, 2009

Brokers' Take


Jan 14, 2009
The Business Times


Singapore Press Holdings
Jan 13 close: $2.93
CIMB-GK Research, Jan 13


CORE earnings in line: Q109 net profit was $73 million (-34.8 per cent y-o-y) versus our forecast of $100.1 million, accounting for 16 per cent of our full-year estimate. The shortfall was mainly caused by investment losses of $33.7 million (our full-year forecast was +$27 million), due to a loss in the value of SPH's externally managed funds.

Operating revenue grew 9 per cent y-o-y to $340.2 million, while costs rose less than expected. Led by a fall in recruitment advertisements, print revenue declined 7.3 per cent y-o-y to $188.2 million. Circulation revenue rose marginally by $2.2 million despite a 2 per cent decline in volume.

Property revenue rose 86.3 per cent y-o-y to $81.1 million, boosted by $50.7 million from Sky@eleven. Materials, consumables and broadcasting costs rose 15.4 per cent y-o-y to $51.2 million, mainly on a 21.3 per cent rise in newsprint costs. Staff costs decreased 2 per cent y-o-y to $76.9 million.

Advertising expenditure was lower than expected, mainly on lower classifieds. In line with the weakening economy, classified ad revenue fell 17 per cent y-o-y while display ad revenue fell 4 per cent y-o-y. Print ad revenue accounted for 55.3 per cent of Q109 revenue.

Forecasts were reduced by 9-15 per cent. We believe SPH's print ad revenue will decline further than expected. As such, we now project an ad expenditure decline of 14 per cent for FY09, instead of 8 per cent. However, the impact should be attenuated by cost savings as we expect newsprint costs to retreat in 2009. SPH will be meeting its vendor to negotiate prices this month. Cost savings from potentially lower prices will likely show up in H209. We have also cut our investment income estimates.

Sum-of-the-parts TP is lowered to $3.77 from $4.01, following reductions in our core media earnings forecasts. Maintain 'outperform' for its decent dividend yields of more than 6 per cent. SPH is likely to continue paying out a large portion of its recurring earnings as dividends.