SPH – DBSV

Gunning for more properties

FY10 results in line; final+special DPS of 20 Scents, above consensus but below ours

Storing up for retail property investments; we expect participation in 2 HDB/URA retail/mixed sites

Downgrade to Hold on limited upside, catalyst; TP reduced to S$4.37 as EPS trimmed a marginal 2%

Share price supported by yield of c.5.7%

20 Scents DPS payable on 23 Dec. Final and special dividends (20 Scents) were a tad above consensus’ average, but below what we had hoped for. Nonetheless, it brings full year DPS to 27 Scents (FY09: 25 Scents). Dividend ex-date is 9 Dec and is payable on 23 Dec. Operating profits were within expectations on higher ad revenues (+9% to S$733m) on economic recovery, offset partially by lower property contributions (-3% to S$356m) with Sky11 TOP in May 10. Staff costs was higher (+19% to S$340.5), but was offset partially by lower newsprint (-29% to S$90m).

Looking for opportunities to further scale up on property. Management indicated that they would continue their opportunistic stance to bid for investment/ retail properties sites. We note that the Group’s short-term investments have almost doubled to c.S$897m as of FY10, largely from its MTN proceeds, to avail funds for sub-urban retail properties investment opportunities. In our view, the Group would be keen in the 2 commercial/ mixed sites in

Punggol and Paya Lebar (on reserve list) by HDB/ URA. However, with keen competition in this area, we believe that share price could be susceptible to outcome of the bids put in by the Group.

TP revised down to S$4.37; Downgrade to Hold on limited upside and catalysts. We adjusted our FY11F/12F earnings marginally by c.2% to account for higher operating expenses. As a result, our sum-of-parts TP is revised to S$4.37. Given limited upside, lack of firm catalyst ahead and uncertain outcome pertaining to the expected bids for investment property sites, we downgrade our recommendation to Hold. Notwithstanding our downgrade, we believe share price could still be supported by its attractive yield of c.5.7%.

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