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).


Risks have declined

• Shift to laggards. Equity markets have been rallying in recent months. As we are expecting a pullback in the near term given expectations of less-positive economic data from the US, we would advocate a return to defensives like SPH. Furthermore, SPH has been a laggard in the recent rally, underperforming the STI by 36% despite gaining 22% since Mar 09.

• Ad demand has bottomed. Our page count indicates that print advertising revenue bottomed out early this year. The page count for the latest Saturday edition was 218 pages, above Jan 09’s low of 169 pages. However, it will take time for SPH’s advertising revenue to recover to boom-time levels. Yoy, the Saturday edition page count was down by 68 pages to 200 in May 09. Even so, with sell-side analysts still adopting the previous recession for forecasting media revenue, we believe there could be upside if ad demand stays resilient.

• Recent rally reduces earnings risks. Concerns over buyers defaulting on Sky@eleven residential units should ease now that property prices have risen. The last transacted price for this project was above the launch price of S$975psf. Also, investment losses booked in 1H09 could turn into gains in 3Q09, given recent market rallies.

• Outperform. We have raised our FY09 earnings estimate by 5% to account for lower investment losses. Our sum-of-the-parts target price remains S$3.52.