SPH – DBSV

Hold for decent sustainable yields

At a Glance

2Q12 within expectations; 1H12 forms 46% of our estimates similar to previous years

Rental income shines, while Newspaper & Magazines posted anemic growth

7 Scts interim DPS declared; expect full year DPS of 24 Scts

Hold for 6.2% yield, TP unchanged at S$4.01

Comment on Results

2Q within expectations; 7 Scts interim dividend declared. Net profit grew by 12% y-o-y to S$84.1m, aided largely by stronger rental property income and a tax write-back of S$1.2m. Interim DPS of 7 Scts was declared, as expected. Book closure will be on 9 May, with payment on 23 May.

Rental income from property shines. Total revenue growth was subdued at 4% y-o-y to S$298.5m. By segments, Newspaper and Magazines registered flat revenue growth (S$234.5m, +0.1%) while Property rental revenue increased strongly by 22% to S$48m, supported largely by a full quarter contribution from Clementi Mall (+S$7.8m to S$9.2m) vs partial in 2Q11. EBIT margins rose 1.4ppt y-o-y to 32.4% as operating costs increased by slower 2.2%. Staff costs decreased by a marginal 0.3%, but costs such as newsprint (+3.5%), depreciation (+6.8%) and other operating expenses (+6.3%) headed higher.

Print ad growth in line with our FY12F for flat growth. Revenue from print ads rose a marginal 0.8% y-o-y in 2Q12, versus the 1.3% decline in 1Q12. The cautious employment market took a toll on recruitment ads, which contributed to a 9% dip in classified ad revenue. Display ads, however, improved 4% helped by the property and auto sectors. 1H12 print ad revenue was down a marginal 0.3% y-o-y, on track to meet our assumption for flat growth for the year.

Recommendation

Hold for 6.2% yield, TP remains at S$4.01. We see share price trading within a narrow range on the back of an uncertain global economic environment, with support from its attractive 6.2% yield. Maintain Hold for 9% total return to S$4.01 TP.

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