BUY: Deutsche Bank - Apr 16, 2008 (BT)

BackApr 16, 2008

Brokers' Take

BUY: Deutsche Bank

Apr 16, 2008
The Business Times


Singapore Press Holdings
April 15 close: S$4.51
Deutsche Bank, April 14

SINGAPORE Press Holdings' (SPH) Q2 FY2008 results were operationally solid with core revenues and Ebitda in line with our expectations. But net profit after tax was impacted by significantly lower-than-expected investment income and Sky@Eleven recognition.

Specifically, although Q2 advertising revenues were seasonally lower q-o-q, they increased 11 per cent or S$18 million y-o-y to S$180 million, driven by y-o-y growth in both classifieds and displays. Total H1 FY2008 advertising revenues were in line with Deutsche Bank's (DB) FY2008 estimates at 49.8 per cent. Q2 circulation revenues remained flat q-o-q and y-o-y at S$51 million. As such, Q2 revenues (excluding Sky@Eleven) increased 9 per cent y-o-y to S$274 million, as per expectations.

Similarly, although costs increased slightly faster than revenues, the rate of growth was within our expectations as increases in staff costs (due to a three-year-high headcount and a 4 per cent rise in average per staff costs) were offset by declines in newsprint costs (on lower consumption and paper costs). Excluding Sky@Eleven, Q2 Ebitda increased 12 per cent y-o-y to S$111 million (a 40 per cent Ebitda margin). In fact, total H1 FY2008 Ebitda (excluding Sky@Eleven) was 52 per cent of DB's FY2008 forecast.

But Q2 net profit after tax was impacted by very low investment income, which resulted in Q2 net profit declining 6.3 per cent y-o-y to S$99.6 million despite strong operational performance (profit pre-investment income was up 36 per cent y-o-y). The S$5 million investment income (S$10 million in Q1 FY2008) was the lowest in four years and compares to DB's FY2008 forecast of S$90 million. In addition, H1 FY2008 net profit was constrained by SPH booking just S$24 million in revenues in Q2 from Sky@Eleven. Total Sky@Eleven revenues in H1 FY2008 (S$40 million) were 18 per cent of DB's FY2008 forecast (S$229 million).

As such, H1 net profit (S$211.5 million) represented just 39 per cent of DB's FY2008 forecast (S$543 million), but we expect greater Sky@Eleven revenue recognition in H2 FY2008 and the in-line operational performance continues to underpin. TP is at S$5.39.


Compiled by CONRAD TAN