Operating earnings firm as expected

Comment on Results

Results were in line with expectations as EBIT rose 20% yoy to S$127m on topline growth of 15% to S$315m. Top line growth was led by an 8% increase in newspaper and magazine revenue whilst a S$16m revenue recognition from Sky@Eleven helped property revenue rise 70% yoy.

Investment income dipped by 67% yoy due to a) a more volatile equities market and b) higher dividend income from M1 and capital reduction exercise by Starhub in 1Q07 last year.

Overall bottom line growth was just 1% to S$112m due to lower investment income.

Recommendation

SPH’s core newspaper operations continue to do well, with display and classified revenue posting a combined yoy growth of 10.2% (including magazines 10.5%), Revenue
contribution from Sky@Eleven of S$16.1m was slightly below expectations compared to S$71m contribution in 4Q07 but property development is inherently lumpy so we are comfortable with our full year forecasts at this time (of S$228.6m revenue).

Maintain BUY, TP S$5.80. We like SPH as a proxy for Singapore’s strong economy and also as a defensive play in this current volatile environment. Yield is attractive at 7% net.

Paragon in $82m facelift, expansion

SPH investment to yield contemporary facade, more retail, commercial space

THERE will be a new look for Paragon shopping centre come October. The Orchard Road mall will get a $45 million makeover – to update its building facade and increase retail space.

The facelift will begin this month, and is expected to be completed in October.

In addition, the commercial space above its retail podium will be expanded – at a cost of $37 million, including the payment of land premium. This is scheduled to be completed by end-2008.

The total cost of the facade makeover and the addition of commercial space is $82 million.

Singapore Press Holdings, which owns and manages the prime retail and office complex, says that the makeover is part of Paragon’s continuous efforts to enhance its retail environment and shopping experience for customers.

And shoppers need not fret: Paragon will remain open and operate as it normally does during the renovation period.

The shopping centre’s current glass and granite facade cladding will make way for a ‘contemporary yet elegant’ look with the installation of pop-out glass boxes.

They will be made of multi-faceted layers of aluminium panels and fritted glass with in-built energy-saving LED lights.

The new three-dimensional facade will comprise multiple transparent, glazed and volumetric external shop-fronts installed above the walkway level.

Five duplexes of designer stores facing Orchard Road will front the mall and each will see its shop front increase by three times the current height. ‘At the busy intersection of Orchard Road and Bideford Road, a luxury brand’s flagship store will enjoy a looming five storeys of shopfront starting from ground floor, providing a dramatic visual interest at this significant landmark junction,’ said SPH.

Paragon’s renovation and higher concentration of sophisticated designer stores are in line with the transformation of Orchard Road into a shopper’s paradise for the increasing number of well-heeled international visitors coming to Singapore.

‘The design is also prompted by luxury brand retailers looking for more space to expand and build their signature flagship stores and an opportunity to do something different,’ said Linda Kwan, general manager of Paragon.

‘Paragon’s facade, when expanded forward by four metres towards the Orchard Road pedestrian walkway and spanning 115 metres in total length, will provide these tenants with significant visibility and brand expression.’

The facade project is undertaken by DP Architects, which also oversaw the integration of Paragon and the former Promenade into a single shopping mall in 2003.

There will be minor upgrading works within Paragon, including the addition of new balustrades for a contemporary look.

Upon completion of the enhancement works, the nett lettable area at the retail podium will increase by about 11,600 square feet.

The commercial space above the Paragon retail podium will be expanded by another 29,000 square feet – with the construction of two more floors for medical and office use.