SPH – CIMB

Holding steady

• Post-luncheon takeaways. We hosted a post-results luncheon for 17 institutional clients last Friday. SPH’s CFO, Mr Tony Mallek, addressed several issues which were of interest to clients: 1) ad demand recovery; 2) newsprint prices; 3) revenue recognition of Sky@eleven; 4) investment portfolio, and 5) the potential sale of SPH’s Paragon and M1 stakes.

• Media earnings will take time to bounce back. From discussions with management, we believe that ad demand may have bottomed out. However, a recovery is still months away. Although overall demand visibility is unchanged, SPH feels that advertisers, including property developers, are more ready to advertise.

• Positives from pick-up in property market. The latest revaluation of Paragon by Knight Frank was S$1.98bn, slightly below 2008’s value of S$2.00bn, vs. our valuation of S$1.43bn. As major risks related to its properties have eased, we believe SPH’s share price should do well.

• Outperform. Our earnings estimates have been adjusted by -1.8% to +6.3% for FY09-11, to factor in a shift in revenue recognition for Sky@eleven from FY09 to FY10, and lower staff costs. Our media earnings assumptions are intact. Our sum-ofthe- parts target price has been raised to S$3.99 from S$3.52, boosted by the revaluation of Paragon at S$1.98bn vs. our previous estimate of S$1.43bn.

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