SPH – DBS

Strong July AdEx growth

Story: Nielsen Media’s latest AdEx figures show that SPH’s newspaper display and classified ad volumes for July 2008 grew by 12.6% y-o-y. For SPH’s 11 months to date for FY08 (September to July), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.9% yoy.

Point: We believe that these figures indicate that SPH is right 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.

We expect SPH to reports its 4Q and FY08 results around mid-October and are projecting the Group to propose a final net dividend of S 24cts (interim dividend was S 8cts), given continued growth in its core publishing business, higher property rental income and further revenue recognition from the Sky@Eleven residential development.

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-ofthe- parts valuation for SPH is S$5.75.

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