SPH – Lim and Tan

Strong Home Sales & Weak Euro

• The highlight of SPH’s Q3 performance (3 months to May ’10) is the strong rebound in print advertisement revenue and profit, reflecting the launch of:

– several property developments, as seen in strong home sales, especially in April when 2208 units were sold;

– European cars, because of the weak euro.

• Profit from Sky @ 11 continued to play a key role in SPH’s bottom-line, except that with TOP having been obtained, contributions have largely been recognized. As at end May ’10, revenue and profit came to $674 mln and $480 mln respectively.

• The value of Paragon may have risen, to $2.28 bln as at mid July, but upgrading spend will likely continue to rise, given the ever-intense competition along the Orchard road shopping belt.

• Clementi Mall, a 60–40 JV with NTUC Income / Fairprice, will commence operations in H1 2011.

• As at end May ’10, investible funds totaled $1.1 bln (up from $800 mln three months ago), spread among cash 26.2%; equities (23.6%), bonds (31.6%), and investment funds (18.6%). The biggest increase was the allocation to bonds, rising from 19.6% at end Feb ’10, reflecting a cautious stance by management.

• SPH’s main attraction remains its 6.3% yield, assuming unchanged 25 cents dividend per share for ye Aug ’10. (Interim was 7 cents per share.)

• Maintain BUY.