SPH – DBS

June AdEx Numbers In Line

Story: Nielsen Media’s latest AdEx figures show that SPH’s newspaper display and classified ad volumes for June 2008 grew by 6% y-o-y. For SPH’s 10 months to date for FY08 (September to June), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.4% yoy.

Point: SPH is more or less on track to meet our assumption of 7% yoy growth in display and classified ad volumes for FY08, reflecting robust domestic consumption spending in Singapore thus far. Whilst growth in advertising revenue is expected to slow down, we remain positive on the Group’s longer-term prospects given its monopolistic position in print advertising, attractive property asset i.e. The Paragon and strong balance sheet. All these translate to firm, growing cash flows for SPH, which should help to continue to support the stock’s generous dividend
payouts.

Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of >7.5% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our sum-of-theparts valuation for SPH is S$5.75. Stripping out the current value of its net cash holdings and property, SPH core publishing business is trading at undemanding 11.2x earnings or 7.6x EBITDA.

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