August AdEx grew 8.9%

Story: In the latest Nielsen Media Research’s AdEx figures, expenditure on SPH’s newspaper display and classified ads rose 8.9% y-o-y in Aug. Based on SPH’s full year (Sep 07 – Aug 08), advertising expenditure grew 7% y-o-y, which is similar to our full year estimates.

Point: We note that AdEx tends to correlate with economic growth. In view of a more challenging outlook, we are assuming flat AdEx growth in FY09F (from a 2.5% growth previously). We also assumed higher newsprint cost of US$850/mt, up from US$710 previously assumed. As such, we trimmed our FY09F net profit down by c.8% to S$490.4m. On a bear-case scenario, assuming an 11% plunge in AdEx as per 1998, we estimate that our net profit forecast for FY09F could drop to S$427m, 13% lower than our current estimates. This would equate to a TP of S$3.97 – still above current trading price – assuming all other factors remain constant. However, in our opinion and at this point in time, we do not see such a drastic drop as per 1998.

Relevance: Maintain Buy, TP: S$4.63. Along with a potential slow down in AdEx and a de-rating of the market, we now peg the newspaper operations to 16x FY09F earnings (from 20x previously). Our SOTP valuation is hence revised to S$4.63. In the current volatile market, we like SPH for its defensive feature backed by an attractive net dividend yield of >7.5%. In the last 6 years, SPH have paid out more than 90% of its EBIT). SPH should be reporting its 4Q and FY08 results on 10 Oct and we are projecting a final dividend of 24 Scts (on top of interim dividend of 8 Scts), given growth in core publishing business, growth in its property rental and
further revenue recognition from its Sky@Eleven residential development.

SPH buys Shareinvestor.com

It will pay up to $18m if financial portal meets targets

Singapore Press Holdings (SPH) will buy online financial portal Shareinvestor.com for up to $18 million as part of its efforts to broaden its Internet-based financial services, the publishing company said yesterday.

SPH, which publishes The Business Times, said that it has agreed to acquire all the shares of Shareinvestor.com Holdings from its existing owners for between $12 million and $18 million in cash.

The exact sum payable will depend on whether Shareinvestor.com and its subsidiaries hit certain targets for their 2008 and 2009 financial years.

Under the terms of the agreement, the overall purchase price may be reduced if the targets are not achieved, SPH said in a statement yesterday.

The existing owners of Shareinvestor.com include the Lexicon Group, a Singapore-listed magazine publisher, which owns a 27.7 per cent stake in the company.

The other owners are individuals, comprising its founder and chairman Michael Leong, chief executive Christopher Lee, group IT director Lim Dau Hee and five others.

Lexicon – or Panpac Media.com, as it was then known – first bought its stake in Shareinvestor.com in February 2002. It paid $1.1 million in an all-share deal for 1.85 million Shareinvestor.com shares, or what was then a 25 per cent stake, valuing the company at $4.4 million.

In a statement yesterday, Lexicon said that it expects to make a net gain of about $3.7 million from the sale of its stake, based on the maximum $4.92 million it will get if Shareinvestor.com meets all the targets set out in the agreement.

In March 2004, Shareinvestor.com explored listing on the Singapore Exchange, according to a statement at the time by Lexicon. Shareinvestor.com hired OCBC Bank as issue manager, but ultimately did not go public.

The acquisition by SPH – through subsidiary SPH Interactive – is subject to ‘satisfactory due diligence findings’ and other approvals, SPH said. Lexicon’s shareholders will also have to agree to the sale of its stake.

SPH said that it will fund the purchase from internal resources and the deal will not have a material impact on its earnings or assets for its current financial year, which ends next August.

Founded in 1999, Shareinvestor.com provides financial market news and commentary, data feeds and analytical software and other services for stock trading – some free and others on a subscription basis. It operates in Singapore, Malaysia and Thailand and has more than 7,000 paying subscribers, according to its website.

It also provides online investor relations services for companies in the region, including StarHub, Noble Group and Cosco Corp here, through another website it operates, Listedcompany.com.

It has paid-up capital of $5.9 million.

Newsprint cost moving up

Strong July AdEx growth

Story: Nielsen Media’s latest AdEx figures show that SPH’s newspaper display and classified ad volumes for July 2008 grew by 12.6% y-o-y. For SPH’s 11 months to date for FY08 (September to July), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.9% yoy.

Point: We believe that these figures indicate that SPH is right on track to meet our assumption of 7% yoy growth in display and classified ad volumes for FY08, reflecting robust domestic consumption spending in Singapore thus far. Whilst growth in advertising revenue is expected to slow down, we remain positive on the Group’s longer-term prospects given its monopolistic position in print advertising, attractive property asset i.e. The Paragon and strong balance sheet. All these translate to firm, growing cash flows for SPH, which should help to continue to support the stock’s generous dividend payouts.

We expect SPH to reports its 4Q and FY08 results around mid-October and are projecting the Group to propose a final net dividend of S 24cts (interim dividend was S 8cts), given continued growth in its core publishing business, higher property rental income and further revenue recognition from the Sky@Eleven residential development.

Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of >7.5% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our sum-ofthe- parts valuation for SPH is S$5.75.

June AdEx Numbers In Line

Story: Nielsen Media’s latest AdEx figures show that SPH’s newspaper display and classified ad volumes for June 2008 grew by 6% y-o-y. For SPH’s 10 months to date for FY08 (September to June), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.4% yoy.

Point: SPH is more or less on track to meet our assumption of 7% yoy growth in display and classified ad volumes for FY08, reflecting robust domestic consumption spending in Singapore thus far. Whilst growth in advertising revenue is expected to slow down, we remain positive on the Group’s longer-term prospects given its monopolistic position in print advertising, attractive property asset i.e. The Paragon and strong balance sheet. All these translate to firm, growing cash flows for SPH, which should help to continue to support the stock’s generous dividend
payouts.

Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of >7.5% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our sum-of-theparts valuation for SPH is S$5.75. Stripping out the current value of its net cash holdings and property, SPH core publishing business is trading at undemanding 11.2x earnings or 7.6x EBITDA.