SPH sells 20% 701Sou stake to Star

MEDIA group Singapore Press Holdings (SPH) is selling a 20 per cent stake in 701Sou (Hong Kong) Pte Ltd to Malaysia’s Star Publications for $5 million.

In a statement yesterday, SPH said that the sale by its subsidiary SPH Interactive International (SPHII) was on a willing-buyer, willing-seller basis and completion was expected to be within 14 days.

701Sou provides online directory search services in China through its website (701Sou.com).

Launched last November, the site has attracted a monthly visitor rate of six million and a return visitor rate of over 28 per cent.

On completion of the transaction, SPHII will still be the major shareholder of 701Sou with a direct 55 per cent stake and an indirect 5 per cent stake through its 50:50 joint venture company 701Search Pte Ltd, which owns 10 per cent of 701Sou. Fung Choi Printing owns 15 per cent.

This is the second time that SPHII has formed an alliance with Star Publications.

In April last year, the group forged a joint venture with Star Publications for the provision of online directory search services in Malaysia through 701Panduan.

Like 701Sou.com, 701Panduan.com has also grown to be a popular site with local users. ‘Launched since March this year, the site averages a monthly visitor rate of one million and a return visitor rate of 30 per cent,’ said SPH.

SPH CEO Alan Chan said: ‘Following 701Panduan, we are confident that the synergistic partnership between SPH and Star Publications will continue to contribute to the success of 701Sou.

‘We look forward to more future collaborations between the two media powerhouses.’

The transaction has no material impact on the earnings per share or the net assets per share of SPH for the financial year ending Aug 31, 2009.


Job Ads Are Rebounding From Depressed Level

Job ads are rebounding from depressed level. Job ads started sliding from August last year (a total of 408 job ad pages) to hit a depressed level in December (172 pages, -41% yoy), according to our page-counts of The Straits Times. The latest May page-count is a clear sign that confidence is returning with recruitment drive stepping up. Job ads in The Straits Times totalled 230 (-48% yoy), 224 (-46% yoy) and 258 (-38% yoy) pages in March, April and May respectively. Apart from rising advertising spending, this trend also points to broader positive macroeconomic implications.

Worst in 3QFY09, but monthly data suggest a gradual recovery. Singapore Press Holdings (SPH) will be releasing its 3QFY09 results in early-July. 3QFY09 is likely to show the worst performance in the current economic crisis. Our page-counts point to an 18% yoy contraction in SPH’s advertising revenue (AR) in 3QFY09 (2QFY09 page-counts: -13% yoy). Our monthly page-counts, however, are showing a gradual recovery with a contraction of 23% yoy, 16% yoy and 14% yoy in March, April and May AR respectively.

Newsprint price continues on a downtrend. The price of 30-lb newsprint currently stands at US$550/tonne and has yet to bottom. Newsprint price peaked at US$760/tonne in December and has been on a decline since then.

Defensives to play catch-up with cyclicals, which have rallied strongly in the current market rebound from March lows. With advertising spending showing signs of a gradual recovery, we see a re-rating of SPH. While the stock is usually a late-cycle recovery play, we believe it will stage an early comeback this time round, aided by the opening of Singapore’s two mega integrated resorts, Marina Bay Sands and ResortsWorld@Sentosa. We maintain our BUY call and target price of S$3.90.


Violation of key support suggests further downside in the near term

– SPH could see more downside pressure in the days ahead following the breach of the lower boundary of the 3-month uptrend channel and the key resistance-turned-support level of $3.10 in the last trading session.

– With the RSI displaying a bearish divergence to the price action over the last 2 months and the MACD breaking under its 3-month uptrend line yesterday, they seem to echo our views that the uptrend momentum is waning and a further correction is likely.

– We expect the stock to find initial support at $2.82 (the next key resistance turned support level), breaking which, the next support is likely at $2.62 (minor troughs in Jan and Feb ‘09)

– Immediate resistance is pegged at $3.10 (key support-turned-resistance level), ahead of $3.29 (Jan ’08 and Jun ’09 peaks).