SPH – CIMB

Chugging along

The underlying business continues to chart a steady course, allowing management to declare a 24Scts dividend again. Earnings were lower because of weaker investment income. Property remains the star performer and could help make FY13's dividend payout even larger.

FY12 earnings came in largely in line, at 95% of our and consensus estimates. We tweak our FY13-15 numbers slightly on lower circulation revenue leading to a marginally lower SOP target price. Our Outperform rating is maintained; stronger rental income and ad revenue growth are rerating catalysts.

FY12 review

Operating profit came in slightly higher than last year, but earnings were lower yoy on weaker investment income. Management guided that newsprint charge out rates have come down slightly and if they stay around the current level, margins are likely to creep up in 2H13. FY12 saw the property arm continue to provide robust growth, offsetting the gradual decline in circulation revenue (-2.7% yoy). Ad revenue (-0.7% yoy) was down due to fewer property advertisements after the government introduced cooling measures.

Property outperformance

We expect the property arm to continue being the star performer in FY13. This year saw rental increases at both Paragon (+S$4.6m, +3.1% yoy) and Clementi Mall on the back of a full year of operations (+S$18.6m, + 3.1% yoy). As Clementi Mall matures, rentals will continue to see good upside. The expected completion of Seletar Mall by end-FY14 should further increase the group's recurring earnings base.

Dividends may possibly grow

We think there is a chance dividends may increase on higher recurring profit as Clementi Mall matures. The 24Scts of dividend declared represents a yield of 6% The balance sheet is still in good shape; net gearing stands at 0.4x.

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