SPH – Lim and Tan

Ahead Of Final Results

Looks as if some have started to speculate on how generous SPH is likely to be with its final & special dividend payout for ye Aug ’10, results for which are not due for another month or so (Oct 12th last year).

The stock has risen 23 cents or 6% in just over 2 weeks, to $4.15 yesterday.

SPH’s dividend had been steadily rising, until ye Aug ’09 (covering the worst period of the financial crisis), when it was cut to 25 cents (7 interim + 9 final + 9 special) from the peak of 27 cents the year before (8+9+10).

We expect SPH to reinstate the final special to 10 cents (and it can more than afford to given the sharp recovery in advertising spending), which with the 7 cents interim already paid, would bring the total for the year to 26 cents, giving a 6.3% yield. (Net profit for 9 months ended May ’10 of $422.6 mln was 23.7% above the same period the fiscal year before.)

This has to be considered attractive.

Yesterday’s $4.15 close has some technical significance, being close to the support-turned resistance level, ie need for some “consolidation”:

– In July ’08, SPH had breached support at the $4.20 level, which had held for much of the period since 2005, and has not been able to surpass the level since.

– The top end of the range had generally been around $4.70-4.80, except for a few occasions when SPH hit as high as $4.90 in Oct ’05, and as low as $3.88 in Aug ’06. (The high in 2007 was $4.74.)

– It bottomed at $2.32 in Mar ’09, like just every other stock in the world.

A commitment by management to a dividend policy would, we believe, enable SPH to retest its high, and possibly even scale new heights.

We maintain BUY.

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