SPH – CS

Across-the-board double-digit rise in ad demand

● According to the CS Page Monitor, newspaper ad demand accelerated further in 2Q FY10E.

● Estimated total classified volume jumped 12% YoY in the first two months of 2Q FY10 – a big improvement from the reported 6% decline in 1Q classified ad revenue. The strong showing is attributable to the 47% YoY surge in job ad volume during the period. While partly due to seasonal effects, the strong job ad demand is in line with the healthy pick-up in the Singapore economy.

● In addition, our page count indicates that display ad volume improved 10% so far in 2Q FY10, versus the reported +2% YoY growth in 1Q FY10 display ad revenues.

● We have raised our earnings forecast to reflect the sharp pick-up in ad demand and expect further consensus EPS upgrades – our FY10 earnings forecast is now 7% above street expectations.

● The stock continues to trade at a substantial P/E discount to the market. Our new target price of S$4.67 represents 24% potential upside from here. We maintain our OUTPERFORM rating.

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