SPH – UOBKH

A trading opportunity that’s worth a bet

Share price weakened following 2QFY08 results announcement. Singapore Press Holdings’ (SPH) has fallen to S$4.07, a 12-month low, following its recently released disappointing results that showed SPH’s newspaper advertising revenue growth slowed significantly from 10.5% yoy in 2QFY08 to 4.2% yoy in 3QFY08. While SPH’s newspaper business is seeing slowing growth, earnings contributions from its Sky@eleven residential property development and expansion of the Paragon shopping mall at Orchard road should buffer SPH’s earnings in FY08 to FY10.

A trading opportunity that’s worth a bet. With dividend yield at close to 7%, we reckon there is limited downside in share price. We advise investors to look forward to the final dividend that will be announced in 4QFY08 results (to be released in mid-October). We are forecasting a final tax-exempt DPS of 20 S cts (an interim DPS of 8.0 S cts was paid following 2QFY08 results), which translates into a net yield of 4.9%, an attractive return for an investment period of three months. Traditionally, SPH’s share price sees a rally in the one month leading up to the announcement of the company’s final results. With the current share price at 12-month low, we reckon it is timely to accumulate the stock for a play on the final dividend payout. Our earnings forecasts and target price (based on sum-ofthe- parts valuation) of S$4.70 remains unchanged.

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