SPH – Kim Eng
• We hosted a post‐results luncheon for Singapore Press Holdings (SPH) last week. In a lively exchange with fund managers, CEO Alan Chan, CFO Tony Mallek and Senior VP of Finance, Ms Babsy Young, offered interesting insights into the workings of the group.
• To questions about SPH’s monopoly in print advertising and the impact of declining readership on ad rates, Mr Chan was quick to defend that the ad rates for the group’s selected newspapers have gone up every year between 2004 and 2008 and were not cut even during the global financial crisis. The last increase was in March this year, he said. To counter online media rivalry – Yahoo! News is posing the strongest challenge in terms of readership – the group recently launched its iPad and iPhone apps to sell news subscription. It charges an additional $2 on top of the normal newspaper subscription from the current quarter.
• SPH’s equities investments are in Singapore and mainly in M1 and StarHub in which it holds 13.9% and 0.8% of the shares, respectively. It has less than 10% of the equities investments in industrial REITs and Suntec REIT. The target benchmark return is 4%.
• A dedicated property investment team will spearhead the growth of SPH’s property asset base. However, no target size has been set yet. A spin‐off of assets into a REIT is possible over the long term when the assets grow in numbers. In fact, its total investment portfolio value of $2.7b is now bigger than Frasers Centrepoint Trust’s $1.5b. Management is still keeping an eye out for sales of GLS sites and possibly TripleOne (said to come with a $1.2b price tag) and 313@Somerset.
• Worries over a dividend cut in the absence of a formal dividend policy were assuaged on management’s assurance that the group’s impeccable track record of 100% payout will not be broken as long as the current CEO is at the helm.
Action & Recommendation
We reiterate our BUY recommendation on SPH with a target price of $4.17, based on a total return of 16.7% (FY Aug12F yield: 6.4%).