NEUTRAL: UBS Investment Research - Sep 05, 2008 (BT)

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Brokers' Take

NEUTRAL: UBS Investment Research

Sep 05, 2008
The Business Times


Singapore Press Holdings
Sept 4 close: S$4.07
UBS Investment Research, Sept 3

ADVERTISING data fine for now: Based on AC Nielson data, we believe Singapore Press Holdings' (SPH) three-month moving average advertising revenue has grown 6.7 per cent, which is only half the growth rate of the industry average. While SPH is still doing well at this stage of the economic cycle, we think the top line could feel the pressure of the slowing global economy. We expect top-line growth to slow in FY2009.

Newsprint costs, which make up an estimated 14 per cent of total costs, have risen significantly from US$600 per tonne for the last few quarters to about US$900. We believe this is because of the general increase in commodity prices, rising transport costs and the absence of supply from China, which has restricted its exports.

We have lowered our forecasts for FY2009 EPS from S$0.31 to S$0.30, and for FY2010 EPS from S$0.34 to S$0.33. The changes arise mainly from our higher newsprint cost assumption. We think a significant re-rating of the share price is unlikely in the near term, but the stock is well supported by its 6.2 per cent yield. Therefore we maintain our 'neutral' rating.

Valuation - lower TP from S$4.55 to S$4.45: The stock is trading at 13.7 times FY2009 earnings. We base our TP of S$4.45 on a sum-of-the-parts valuation, with S$1.45 for its non-core business, and a discounted cashflow valuation for its core business.


- compiled by Conrad Tan