BUY: DMG & Partners Securities - Sep 17, 2008 (BT)

BackSep 17, 2008

Brokers' Take

BUY: DMG & Partners Securities

Sep 17, 2008
The Business Times


Singapore Press Holdings
Sept 16 close: $4.00
DMG & Partners Securities, Sept 16

INTERNET business expansion: SPH announced that it has, through its wholly owned subsidiary SPH Interactive Pte Ltd, acquired 100 per cent of, the leading financial portal in Singapore. This move will allow SPH to develop financial services as a part of its portfolio of Internet services. The media giant will pay between $12 million and $18 million for the acquisition. Taking the lower end of the band, SPH would have made the acquisition at 5.2 times historical net book value.

SPH believes that the Internet presents exciting growth opportunities for the company. While it is still a very small part of its media empire, the management has some grand plans for it, earmarking $150 million over the next three years on various web-based initiatives.

The acquisition will have no impact on SPH's financials in the near term and we are maintaining our estimates. We believe that earnings will fall 4.6 per cent to $482.8 million in FY2008, before rising 19.4 per cent to $576.6 million in FY2009. Despite the fall in earnings, yields are expected to climb this year. This is due to the fact that payouts are based on recurring income (does not include net income from investments) rather than net earnings. We estimate dividend yields to be 7.4 per cent in FY2008 and 9.1 per cent in FY2009, making it one of the best-yielding blue chips.

Maintain 'buy': Based on our sum-of-the-parts valuation, our TP remains at $5.00, representing a capital upside of 23.8 per cent. Coupled with the prospective yield, the total 12-month return works out to 31.2 per cent.