Month: December 2007
SPH – UOBKH
Great tidings of Christmas indulgence
Bumper page-count suggests strong advertising revenue growth. Last Saturday issue of The Straits Times totalled 304 pages. Compared to the corresponding Saturday of Dec 06 (totalling 270 pages), this suggests a bumper advertising revenue (AR) growth of 12% yoy, driven by a strong display advertising growth of 11% yoy. We understand from SPH, advertisers have stepped up their festive season’s advertising expenditure well ahead of Christmas in anticipation of a much stronger consumer spending this year compared to last year. With a robust domestic economy, full employment, large year-end bonuses, a buoyant consumer confidence and higher tourist arrivals, retailers are looking forward to strong sales in the upcoming festive season.
Sustained strong AR growth into FY08. Our page-counts of The Straits Times, the bellwether of Singapore’s advertising expenditure, for Oct 07 and Nov 07 are indicating robust AR growth of 6% and 7% respectively. Separately, ACNielsen data is suggesting a healthy AR growth of 5% in Oct 07. SPH’s AR moved out of the doldrums in 2HFY07. The company’s overall AR growth improved from 2.1% in 1QFY07 to 3.9%, 10.2% and 10.7% in 2QFY07, 3QFY07 and 4QFY07, respectively. Display AR growth improved from a contraction of 1.3% in 1QFY07 to 4.3%, 11.7% and 9.4% for 2QFY07, 3QFY07 and 4QFY07 respectively while classified AR growth fluctuated from 7.9% to 3.2%, 9.1% and 13.9% respectively. Our page-counts of The Straits Times suggest that the strong AR growth in 2HFY07 has filtered into 1HFY08.
SPH’s AR growth is now in sync with Singapore’s GDP growth, as domestic consumer spending has finally picked up whereas previously, growth was driven by the external sector. SPH’s AR growth has benefitted from more advertising by retailers and an active domestic property sector. The heavy primary residential property launches over the last 2-3 years is now leading to a rise in residential property sub-sales, which is contributing to more classified ads.
SPH is a good defensive stock in times of uncertainty. SPH’s core fundamentals are now supported by a healthy AR growth, Paragon Shopping Mall’s rising rentals on the back of rising rentals in prime shopping locations in Singapore, full-year earnings contributions from Sky@eleven and a high annual net dividend yield of 6-7% p.a. Maintain BUY and our target price of S$5.40 (based on our sum-of-the-parts valuation of S$5.40/share).
SPAusNet – SGX
Notification of Cancellation of General Meeting
Notice is hereby given that the general meeting of SP Australia Networks (Distribution) Ltd, SP Australia Networks (Transmission) Ltd and SP Australia Networks (Finance) Trust (“SP AusNet”) scheduled for 10.00am on Tuesday 11 December 2007 has been cancelled.
The SP AusNet Board has decided not to proceed with the proposed acquisition of the Alinta assets and businesses from its majority securityholder Singapore Power International Pte Ltd (“SPI”).
The Board has noted the ongoing deterioration in capital markets, in particular debt capital markets, since the Explanatory Memorandum was released. Current conditions would have a material impact on the overall transaction metrics, as well as SP AusNet’s ability to achieve the forecasts provided in the Explanatory Memorandum.
The Board and its financial advisers, Pacific Road, therefore consider it is no longer in the best interests of SP AusNet to proceed with the transaction.
SP AusNet Chairman, Mr Ng Kee Choe, said, “The management team has spent considerable time with our existing and potential new securityholders since the release of the Explanatory Memorandum in November and the Board acknowledges that investors have had mixed views on the proposed acquisition.
However, had the capital market conditions been more favourable for raising fresh debt and equity capital the Board would have proceeded to the securityholder vote.”
“Obviously we are disappointed with this outcome. However, the strong fundamentals of our existing business position us well for future growth and we aim to continue to provide a stable and sustainable investment for securityholders today and into the future,” Mr Ng said.
“While the decision to not proceed was a difficult one, it reflects an open, rigorous and transparent process”, said Mr Ian Renard, Chairman of the Independent Directors’ Committee.
The 2007/08 and 2008/09 forecasts provided in the Explanatory Memorandum for the existing SP AusNet business remain applicable. However, SP AusNet has incurred a portion of the costs of the transaction, estimated at approximately $26 million (per page 17 of the Explanatory Memorandum), which will be expensed to the profit and loss in the 2007/08 full year financial statements.
SP AusNet Managing Director, Mr Nino Ficca, said, “Our investors can be sure that the focus of the SP AusNet management team will be on continuing to deliver value from our high quality regulated assets through organic growth, operating efficiencies and delivering on the forecasts outlined for SP AusNet in the Explanatory Memorandum.”
SP AusNet and SPI have, throughout the transaction, been impressed with the benefits which could accrue to the two groups in streamlining and optimising business and operational processes. The two groups will continue to work together to ensure that mutual benefits are realised.
SPI has advised that for the time being, it will manage the Alinta assets as a separate entity and will continue to work closely with SP AusNet to achieve synergies and explore growth opportunities for SP AusNet going forward.
SP AusNet maintains its 2007/08 full year distribution guidance of 11.55 Australian cents per security.
Source : SGX
SPH – BT
Sky@eleven will boost SPH earnings: Tony Tan
Analysts estimate project to yield up to $450m profit
SINGAPORE Press Holdings is expecting a significant boost to its profits for this financial year and the next – from its Sky@eleven condominium project. In his speech at the media group’s annual general meeting yesterday, SPH chairman Tony Tan said: ‘On the property front, our launch of Sky@eleven, a luxury condominium project at Thomson Road, was greeted with overwhelming response. All 273 units were sold out within hours of the soft launch in January 2007.
‘ SPH will enjoy a significant boost to its profits in the next two financial years from contributions from Sky@eleven.’
‘The last financial year has been a good year for SPH,’ said Dr Tan. ‘With group operating revenue of $1.16 billion, net profit attributable to shareholders crossed the half-billion mark to hit $506.2 million.’
The group’s $506.2 million net profit was 18.1 per cent higher than the previous year’s $428.5 million, which included an exceptional gain of $66.8 million.
The FY2007 results included a maiden profit recognition of $47.8 million from Sky@eleven. Profits from Sky@eleven are being recognised on a percentage-of-completion basis and temporary occupation permit (TOP) is expected in early 2010.
Analysts had estimated total profits from the project at $350 million to $450 million.
At yesterday’s AGM, some shareholders were concerned about the group’s core print business, citing trends of declining newspaper readership in other developed countries.
Another shareholder asked about generating more revenue from online media. Responding, Dr Tan said that the group is continuing to invest in other media platforms.
‘$100 million has been earmarked to invest in the Internet (business). So when the trends overseas come to Singapore, SPH will be prepared and be in a good position to exploit the online space.’
Like any new business venture, building revenue from online services will take time, he said.
Dr Tan also said that SPH is making further inroads into the online search business. Online search and directory services for the China and Singapore market are expected to be rolled out next year, as well as regional online classifieds, he said.
Both are part of the joint venture formed last year with Norwegian media group Schibsted ASA. ‘Online directory portals will be the future for SPH,’ Dr Tan said.
The traditional core newspaper and magazine business continued to make up the bulk of profits for the group, and investing in its current stable of papers continues.
Singapore’s first Chinese freesheet my paper will be revamped into a full-fledged bilingual newspaper early next year. It will have equal emphasis on the Chinese and English languages and will be expanded into a 48-page paper from its current 24-page format.
‘Circulation of our other newspapers, such as The Business Times, Berita Harian and Tamil Murasu, also registered creditable increases on the back of strong support from readers and advertisers,’ said Dr Tan.
SPH announced yesterday that directors Cheong Choong Kong and Lee Ek Tieng would step down. Dr Cheong was appointed a director of SPH in 1997. Mr Lee joined SPH as a director in 2001.