OUTPERFORM: CIMB-GK Research - Dec 18, 2008 (BT)

BackDec 18, 2008

Brokers' Take


Dec 18, 2008
The Business Times


Singapore Press Holdings
Dec 17 close: S$3.15
CIMB-GK Research, Dec 17


YIELDS still attractive: We believe that Singapore Press Holdings' (SPH) core media earnings are less at risk from the recession than many Asian media stocks, since SPH controls more than 90 per cent of newspaper advertising in Singapore. This mitigates the worst effects of competition in a recession.

While industry advertising expenditure is likely to contract, SPH's newspaper advertising should benefit from a shift from television advertising. Classified revenue had fallen 6 per cent y-o-y in the last results, but this was muted compared with most other companies. Retreating commodity prices are also positive for SPH, as newsprint costs are unlikely to rise further.

Property recognition will shore up earnings; risks are not overwhelming. Media earnings contraction is likely to be cushioned by profit recognition for the Sky@eleven residential development project, and Paragon. For Sky@eleven, buyers' default risk is fairly low, in our opinion, even though SPH has allowed the deferred payment scheme to be transferred to second buyers.

For default risks to become real, selling prices would have to fall by more than 20 per cent below the project's launch price of $975 psf. For Paragon, we are already valuing this property at $1.5 billion, against SPH's latest revaluation of $2 billion, in mid-2008.

Forecasts are reduced; sum-of-the-parts TP is trimmed to $4.01 from $4.50. In view of the weak economic environment, we expect print ad revenue and investment income to decline. We have cut our earnings estimates by 12-14 per cent. Nevertheless, we maintain our 'outperform' rating. We expect SPH to pay $0.26-0.27 per share in FY2009-10, with yields of more than 8 per cent.



- Compiled by LYNETTE KHOO