BUY: Kim Eng Research (BT)

BackJan 17, 2011


Singapore Press Holdings
Jan 17 close: $4.00
Kim Eng Research, Jan 17


SINGAPORE Press Holdings' (SPH) first-quarter revenue for FY2011 ending Aug 31 met our consensus forecast at $321.4 million. However, operating profit slid 27 per cent y-o-y to $116.3 million in the absence of property development profits and on higher staff costs. Nonetheless, we believe the core media business will continue to underpin its stable dividend yield of 5.9 per cent.

The newspaper and magazine segment recorded a credible increase in revenue of 9.2 per cent y-o-y and 9.6 per cent q-o-q to $265.5 million, driven by higher display and recruitment advertising revenues. Margins contracted slightly on rising newsprint prices, but lower newsprint consumption as a result of improved print technology mitigated the impact.

Rental income from Paragon grew 26 per cent y-o-y to $36.8 million, thanks to positive rental reversions and an enlarged net lettable area. Clementi Mall, which will be fully opened in April 2011, is expected to secure full tenancy. To date, 85 per cent of retail space has been taken up. We expect rental income to make up a higher proportion of group revenue in FY2011 (12 per cent versus 9.7 per cent in FY2010).

SPH remains financially strong with an investable fund of $1.4 billion. With as many as five commercial sites in suburban areas available under the Government Land Sales programme, a land acquisition could be on the cards. However, competition for commercial sites will be intense and shareholders could be rewarded with a return of surplus capital if an acquisition does not materialise.

We raise our revenue and net profit forecasts for FY2011 by 8 per cent and 21 per cent, respectively, to reflect higher rental expectations from Clementi Mall and better than expected performance from the core media business. We also increase our FY2011 forecasted dividend per share to 23.4 cents (from 17.6 cents), based on a 100 per cent payout (previously assumed 90 per cent payout). Maintain "buy" with a TP of $4.75. BUY