BUY: OCBC Investment Research (BT)

BackApr 15, 2010

Singapore Press Holdings
April 14 close: $3.97

SECOND quarter FY2010 results above expectations: Singapore Press Holdings (SPH) delivered a strong set of Q2 FY10 results on Tuesday.

The group's revenue came in at $318.7 million, up 11 per cent year-on-year (y-o-y) due to strong performance in its print advertisement segment (+13.3 per cent y-o-y) and property segment (+18 per cent y-o-y) while profit after tax and minority interest rose 30.2 per cent y-o-y to $113.3 million due to lower newsprint costs (-38.4 per cent y-o-y) and the turnaround in its investments and associates/jointly-controlled entities.

Both topline and bottom line exceeded our expectations.

Positive outlook: With its print advertising sales showing a positive trend with the recovery of the Singapore economy in the second quarter of FY10, management expects its advertisement revenue to continue to move in tandem with the domestic economy, going forward.

On its property front, SPH also painted a relatively rosy outlook, reiterating that its financial performance is likely to be boosted by profits from this segment.

Key supporting drivers for this optimism, we note, include steady recurrent income stream from Paragon, which is expected to maintain its high occupancy (100 per cent currently) and phase contribution from Sky@eleven.

Come August 2010, the HDB is also expected to handover Clementi Mall to SPH.

When this property commences operations in targeted first half CY2011, this would provide another source of steady income for the group.

Maintain "buy" with $4.31 fair value: We are revising our FY10-11 forecasts upwards by 1.6-5.9 per cent in view of the better-than-expected results and brighter outlook.

With our valuation parameters unchanged, this raises our sum-of-the-parts (SOTP) fair value from $3.91 to $4.31.

Since we upgraded SPH to "buy" on Jan 14, we note that its share price has appreciated 7.4 per cent.

Despite this, we see further room for upside now (total return of 16.1 per cent at current level, including 6.4 per cent dividend yield) as SPH continues to benefit from its various business initiatives and improving economy.

As such, we maintain our "buy" rating on SPH.