SPH – UOBKH

FY07 Results

Singapore Press Holdings (SPH) reported its full year results. Net profit was up 18.1% to S$506.2m. However, after excluding exceptional gains of S$66.8m in FY06, net profits actually increased by 40%. Overall, results were in line with expectations.

Maiden earnings contribution from Sky@eleven
SPH recognized approximately 11% of its profits for its property development project, the sky@eleven. SPH recognized S$71.3m in sales and S$94.8m in pre-tax profits for this project. Percentage of completion was higher than our expectations but profitability of the project was in-line with pre-tax margins at 67.1%.

Print revenue and property exceeded expectations; other segments in-line
• Print revenue in 4Q07 increased by 11.2% yoy to S$184.4m
• Print revenue for FY07 increased by 7.2% S$725.1m
• Rental income from the Paragon in 4Q07 increased by 8.9% to S$27.7m
• Rental income from the Paragon in FY07 increased by 7.9% to S$106.5m

Management attributed the stronger than expected growth in print revenue to higher yields in advertising due to an increase in the proportion of colour advertisements. Rental income at the Paragon also improved due mainly on the back of the strong property segment. Going forward, management has indicated that they do not have any plans to sell the Paragon. EBITDA margins excluding the Sky@eleven for FY07 was 41.6% as compared to 41.8% in FY06 as increases in staff costs were in line with SPH’s higher operating profits and newsprint costs remaining largely unchanged.

Final & Special Dividend
SPH has declared a final one-tier tax exempt dividend of 9 Scents and a special one-tier tax exempt dividend of 10 cents. This brings the total dividend paid out for the year to 26 Scents, slightly below our expected full year pay out of 27 cents.

Maintain BUY: Target Price raised to S$5.35
We have raised our valuation of SPH to S$5.35 based on our sum-of-the-parts valuation. Based on the current share price and our earnings forecasts, SPH should offer investors a dividend yield of 7.1%, 7.4% and 7.6% in FY08, FY09 and FY10 respectively. Maintain BUY

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