SPH – DBS

Operating earnings firm as expected

Comment on Results

Results were in line with expectations as EBIT rose 20% yoy to S$127m on topline growth of 15% to S$315m. Top line growth was led by an 8% increase in newspaper and magazine revenue whilst a S$16m revenue recognition from Sky@Eleven helped property revenue rise 70% yoy.

Investment income dipped by 67% yoy due to a) a more volatile equities market and b) higher dividend income from M1 and capital reduction exercise by Starhub in 1Q07 last year.

Overall bottom line growth was just 1% to S$112m due to lower investment income.

Recommendation

SPH’s core newspaper operations continue to do well, with display and classified revenue posting a combined yoy growth of 10.2% (including magazines 10.5%), Revenue
contribution from Sky@Eleven of S$16.1m was slightly below expectations compared to S$71m contribution in 4Q07 but property development is inherently lumpy so we are comfortable with our full year forecasts at this time (of S$228.6m revenue).

Maintain BUY, TP S$5.80. We like SPH as a proxy for Singapore’s strong economy and also as a defensive play in this current volatile environment. Yield is attractive at 7% net.

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