SPH – CIMB

Steady ad demand

Maintain Outperform. Following our recent meeting with management, we remain confident about SPH’s prospects. We expect ad demand to improve further yoy from healthy retail and job markets. No change to our earnings estimates. Our sum-of-the parts target price remains S$4.47. Maintain Outperform as SPH’s future earnings should be bolstered by higher ad demand, in line with Singapore’s improving economy. We expect stock catalysts from lower-than-expected newsprint costs.

Expect pick-up in ad demand come 1Q11. The Saturday edition of The Straits Times averaged 228 pages in August, up 7% yoy but down 6% mom due to a quieter property market during the Hungry Ghost month. However, we believe there will be a pick-up in ad demand come 1Q11 (September-November) as the festive season approaches. YTD page count is up 19% yoy. In line with the economic recovery, newsprint prices have been climbing to US$600-650MT, though still much below peak prices. Newsprint prices have been locked in till Mar 11.

Reasons to like SPH. We continue to like SPH as we believe its print business is well-positioned to benefit from events planned for Asia over the next few years. Also, its dividend yields of 6-7% are comparable to average S-REIT yields and higher than the yields of other large caps.

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