A X’mas gift in cash

• FY09 results in line; final+special DPS of 18 Scents, above expectations
• Drop in ad revenue (-17% yoy) offset by property gains and lower staff costs
• Expect continued ad revenue improvement inline with economic recovery
• Maintain Buy, TP: S$4.22

18cents DPS on 23 Dec. Final and special dividends (18 Scents) are above consensus and our expectations, bringing full year to 25 Scents DPS (FY08: 27 Scents). Operating profits were within expectations on lower ad revenues (- 17% yoy to S$648.3m), offset by higher property contributions (+43% yoy to S$365.6m) and lower staff costs (-14% yoy, S$286.9m). Dividend ex-date is 9 Dec; and, payable on 23 Dec.

Improvement in ad revenues seen. While total ad revenues registered a 17% yoy fall in FY09, we note that the yoy drop on a quarterly basis has narrowed since earlier this year (see Fig. 2, pg 4). We believe this trend should continue in line with an improving economy, GDP growth and with more media-worthy events in 2010 – IRs, opening of retail space, etc.

Sky11 has >S$200m to be recognized; Paragon occupancy at 99%. Sky@Eleven (Sky11) will contribute at least another S$200m revenue in FY10F, while Paragon rentals are projected to remain stable, with occupancy at 99% currently. TOP for Sky11 is still expected to be in 2010. Management indicated its interest to selectively pursue development of property sites, seen in its recent bid for a tender site in Serangoon.

Maintain Buy, TP: S$4.22. We adjust our earnings forecasts up by 7.7%% in FY10F and 6.2% FY11F on a lower tax rate and higher rental revenue expected from Paragon. We maintain our Buy recommendation, given an improving operating performance, supported by a yield of c.6.4% (DPS: 25 Scents in FY10F). We continue to believe its yield of over 6% and improving operational performance is an attractive investment thesis.

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