SPH – Kim Eng

Set for bumper profits

Event

• Robust demand for display and job ads during 9M10, as well as sizeable property development profits, appears to have set the Singapore Press Holdings (SPH) on course to report a record net profit for FY Aug10 when it announces its full‐year results, likely on 12 October. Though sales growth in the fourth quarter moderated somewhat, as reflected in the sequential decline in its page count, we expect higher consumer spending and a strong job market to sustain print advertising demand. Maintain BUY with a target price of $4.62.

Our View

• Display ad volume growth moderated in 4QFY Aug10 as the average page count for the Saturday edition of The Straits Times rose by just 13% YoY compared to +28% in the previous quarter. Sequentially this marked a 4% drop. However, we expect the advertising volume to pick up again in 1QFY Aug11 as year‐end festivities kick in.

• With the completion of Sky@Eleven in June, SPH is eyeing new projects. It recently put in the second‐highest bid of $650.9m for a mixed commercial and residential development site at Bedok. At $694

psf, the price seemed fair as it was close to the third and fourth bids.

• Another catalyst is the opening of the 60%‐owned Clementi Mall next January. Crowd‐pullers such as Fairprice Finest, Foodfare and the National Library Board have signed on as anchor tenants. We await an update on the retail tenancy mix and rental rates in the next 4‐6 months.

Action & Recommendation

Our final dividend forecast of 18 cents a share remains intact, implying a full‐year total yield of 6.1% (DPS of 25.3 cents). The core media business currently trades at an implied FY Aug11F PER of 15x, a slight discount to the Straits Times Index. Other long‐term catalysts are growth in consumer spending and possible spin‐off of its property division. Maintain BUY with a target price of $4.62.