SPH – UOBKH

Worth a trade for FY10’s bumper final dividend

What’s New

• Singapore Press Holdings (SPH) will be announcing FY10’s final dividend in its results release on Tuesday, 12 October.

Stock Impact

• We expect SPH’s share price to rally in the run-up to the release of its FY10 final results on Tuesday, 12 October. This was the case in seven of the last 10 years. The three years that did not mirror this traditional rally were 2000 – due to the tech bubble collapse, 2001 – due to the Sep 11 terrorist attack, and 2008 – the recent global financial meltdown.

• This time round, investors can look forward to a bumper final dividend from SPH given expected strong earnings in FY10. We forecast full-year EPS of 31.7 cents, in line with consensus of 31.6 cents. Our final DPS base-case estimate is 22 cents while our best-case estimate is 24 cents. This translates into a final net dividend yield of 5.4% and 5.9% respectively.

• Investors need not wait for SPH’s actual dividend payout to enjoy the return. History has shown that share price will normally rally in anticipation of the dividend announcement in SPH’s final results. A probable return of >5% in a short period of six weeks is worth a trade.

Earnings Revision/Risk

• No earnings revision. The risk to our final DPS estimate is management’s decision to retain more cash, in view of tempered global economic growth from 2H10 onwards.

Valuation/Recommendation

• Maintain BUY and target price of S$4.50.

Share Price Catalyst

• Near-term share price catalyst is FY10’s final dividend.

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