SPH – CIMB

In an enviable position

Positive momentum on newspaper adex set to continue. Newspaper adex grew by 14.6% yoy in November 2007 which should support a full year growth of 10%, the fastest growth since 2004. We expect newspaper adex to enjoy multiyear growth stemming from a buoyant domestic economy as Singapore transforms itself into a key global destination.

Raising ad rates. In view of the positive outlook, SPH has raised its display and classifieds ad rates by 2.2-7.5% for the Straits Times, the Sunday Times and Business Times with effect from 1 January 2008.

Revising earnings and dividend estimates. We have raised our earnings estimates for core media operations but this is offset by a cut in investment income estimates, resulting in an earnings reduction of 1-4% for FY08-09. However, dividend estimates have been raised by 6-8% on the back of higher payout ratio assumption given robust prospects from recurring operations.

Maintaining Outperform with higher target price of S$5.20. Our sum-of-the-parts based target price is raised slightly from S$5.10 as we upgrade our earnings estimates for the core media operations. We believe that SPH’s defensive earnings as Singapore’s dominant print media player and a solid 7.6% prospective yield positions the stock to outperform the index, particularly in a riskaverse market environment.

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