SPH – CIMB

Positives to look forward to

Maintain Outperform. We lift our sum-of-the-parts target price to S$4.50 from S$4.44 after accounting for higher media earnings and contributions from Clementi Mall. We raise our FY10-12 earnings estimates by 2% to incorporate higher print ad and property revenue estimates, offset by higher interest expense. We believe investors' disappointment with its Clementi Mall acquisition has been priced in. Instead, we urge investors to focus on yoy and mom improvements in ad demand (print ads account for more than 50% of SPH's revenue). We see stock catalysts from better-than-expected ad demand.

Higher page count led by property and job ads. The Saturday edition of The Straits Times averaged 227 pages in February, down from 252 pages in January, as advertising typically slows down during Chinese New Year. However YTD, the page count is up 22% yoy. We believe the uptrend is sustainable, driven by a robust property market and an improving job market. Concerns over high newsprint costs have also eased as prices have been locked in till Sep 10 and remain way below peak prices.

Defensive, with high dividend yields. For investors looking for defensive names, we recommend SPH for its: 1) near-monopoly of the print ad industry in Singapore, making it a beneficiary of a domestic economic recovery; 2) print business which is well-positioned to benefit from an influx of events over the next few years following the opening of two new integrated resorts; and 3) dividend yields of 6-7%, comparable to the average S-REIT yield and higher than yields from the other large caps.

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