SPH – UOBKH

4QFY09 Results Preview: Advertising Revenue Has Turned The Corner

Improving advertising spending. Singapore Press Holdings (SPH) will most likely be releasing its 4QFY09 (June – August) results on 12 October. We are expecting a newspaper advertising revenue (AR) contraction of 15% for 4QFY09, an improvement on 3QFY09’s 23% contraction. While AR is still below the level a year ago, it has been making a comeback since April, boosted by Singapore’s residential property boom.

Investment income could surprise on the upside, in view of better financial market conditions. As of end-May 09, SPH had an investible fund of S$0.9b comprising 44.4% cash, 28.7% equities, 14.2% bonds and 12.7% investment funds.

We estimate final DPS of 13-16 cents. A DPS of 13 cents being our worst-case scenario premised on a full-year payout ratio of 86% of earnings and 16 cents is our best-case scenario premised on a payout ratio of 98%. Including the interim DPS of 7 cents that has already been paid, full-year FY09 DPS would be 20 cents and 23 cents respectively (FY08 DPS: 27 cents).

IRs to have a multiplier effect on advertising spending. We believe Singapore’s integrated resorts (IR) will have a positive multiplier impact on consumer spending and hence, advertising spending. At current share price, SPH offers attractive FY10 and FY11 annual dividend yields of 6.5%. Maintain BUY with a target price of S$4.40.

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