SPH – OCBC

Robust 1Q11 performance

Robust underlying performance in 1Q11. Singapore Press Holdings (SPH) kicked off its FY11 on sound footing with 1Q11 revenue of S$318.7m (down 10.0% YoY) and net profit of S$102.3m (down 29.3% YoY). The decline was attributed to the absence of revenue recognition from the group’s Sky@eleven development, which was completed in May 10. Excluding Sky@eleven’s contribution in 1Q10, the group’s comparable revenue would have grown by 12.3% YoY while recurring earnings would have improved by 6.6% YoY. Sequentially, these represented a 8.6% improvement in revenue and a 35.9% jump in net profit. No dividends were declared for 1Q11.

Driven by broad-based growth across all segments. Stripping away Sky@eleven’s contribution in 1Q10, SPH’s comparable performance was driven by broad-based growth across all segments. The Newspaper and Magazine segment delivered a 9.2% YoY increase in sales to S$265.5m, buoyed by a 13.1% gain in print advertisement revenue thanks to stronger demand for display and recruitment advertisements. Rental income from Paragon improved by 26.1% to S$36.8m on the back of rental revisions and increased floor area following recent facade enhancement initiatives. Revenue from the group’s other businesses rose 45.7% to S$16.4m thanks to stronger performance from its internet, outdoor and events management businesses. Despite higher staff and newsprint costs, operating margins were well-controlled at 39.8% in 1Q11 vs. 40.3% in 1Q10.

Economic recovery and Clementi Mall to buoy future performance; maintain BUY. Going forward, we expect SPH’s growth to be supported by (i) stronger advertising demand along with Singapore’s sustained economic growth coupled with improving consumer confidence, and (ii) contributions from Clementi Mall, which is slated for official opening in Apr 11. 85% of retail space has already been taken up to-date, and management expects full tenancy commitment when the mall officially opens. We are keeping our earnings projections and S$4.59 fair value estimate intact. Dividend yield is attractive at ~6%. We maintain our BUY rating on SPH. Key risks include (i) inflationary cost pressure arising from higher newsprint prices, as well as (ii) caps on Clementi Mall’s rental rate – our Reit analyst has cautioned that new supply of retail space could depress rental growth at neighbourhood malls.

SPH – OCBC

Robust 1Q11 performance

Robust underlying performance in 1Q11. Singapore Press Holdings (SPH) kicked off its FY11 on sound footing with 1Q11 revenue of S$318.7m (down 10.0% YoY) and net profit of S$102.3m (down 29.3% YoY). The decline was attributed to the absence of revenue recognition from the group’s Sky@eleven development, which was completed in May 10. Excluding Sky@eleven’s contribution in 1Q10, the group’s comparable revenue would have grown by 12.3% YoY while recurring earnings would have improved by 6.6% YoY. Sequentially, these represented a 8.6% improvement in revenue and a 35.9% jump in net profit. No dividends were declared for 1Q11.

Driven by broad-based growth across all segments. Stripping away Sky@eleven’s contribution in 1Q10, SPH’s comparable performance was driven by broad-based growth across all segments. The Newspaper and Magazine segment delivered a 9.2% YoY increase in sales to S$265.5m, buoyed by a 13.1% gain in print advertisement revenue thanks to stronger demand for display and recruitment advertisements. Rental income from Paragon improved by 26.1% to S$36.8m on the back of rental revisions and increased floor area following recent facade enhancement initiatives. Revenue from the group’s other businesses rose 45.7% to S$16.4m thanks to stronger performance from its internet, outdoor and events management businesses. Despite higher staff and newsprint costs, operating margins were well-controlled at 39.8% in 1Q11 vs. 40.3% in 1Q10.

Economic recovery and Clementi Mall to buoy future performance; maintain BUY. Going forward, we expect SPH’s growth to be supported by (i) stronger advertising demand along with Singapore’s sustained economic growth coupled with improving consumer confidence, and (ii) contributions from Clementi Mall, which is slated for official opening in Apr 11. 85% of retail space has already been taken up to-date, and management expects full tenancy commitment when the mall officially opens. We are keeping our earnings projections and S$4.59 fair value estimate intact. Dividend yield is attractive at ~6%. We maintain our BUY rating on SPH. Key risks include (i) inflationary cost pressure arising from higher newsprint prices, as well as (ii) caps on Clementi Mall’s rental rate – our Reit analyst has cautioned that new supply of retail space could depress rental growth at neighbourhood malls.

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