BT, Published January 30, 2007

All 273 units of SPH condo project sold in 30 hours

Sky@eleven achieved average price of $975 psf, with the highest price paid at $1,200 psf

(SINGAPORE) Singapore Press Holdings (SPH) has sold all 273 units at its freehold condo Sky@eleven off Thomson Road. The media group said in a statement that the four-tower luxury project was snapped up within 30 hours after its soft launch on Sunday evening. It achieved an average price of $975 per square foot (psf), with the highest price recorded at $1,200 psf.

SPH said one major selling point of its maiden condo development was the attractive pricing.

'Buyers who turned up at the showsuites were also drawn to the spaciousness of the units, which range from 1,851 square feet to 2,820 square feet. The apartment types include mostly four-bedroom and three bedroom + study,' the SPH statement said.

The condominium is being developed by wholly owned subsidiary Times Development Pte Ltd. Times Development chairman Sum Soon Lim said: Sky@eleven truly offers value for money given the luxury lifestyle concepts it offers.'

In its statement, SPH also noted that the overwhelming response to Sky@eleven was not unexpected given the current bullish property sector, 'particularly the popular demand for luxury homes in prestigious districts'. SPH said the number of staff who bought units in the project was not significant compared to the number of buyers from the public. 'There is no discount for SPH staff and SPH board of directors,' it added.

Located at Thomson Lane, the 43-storey Sky@eleven will be the tallest development in the area, offering views of the reservoirs and the city skyline. The project, which could be completed as early as end-2009, was marketed by Knight Frank.

Extracts fm DBSVickers report dated 19-Jan-07,

The sky’s the limit

2006 December AdEx Figures. AC Nielsen released their November advertising expenditure figures, which indicate that SPH’s newspaper display advertising volume rose by 9.9% yoy that month. In total, SPH’s display ad volume for its 1Q07 rose by 6.1% yoy, compared to 2.9% yoy growth for sister publication Today – the first time that SPH’s growth has outstripped that of Today’s over a three-month period. In comparison, Today’s AdEx revenues grew by just 2.3% yoy in December (2.8% yoy growth for Sep-Dec ’06). For Singapore, total newspaper AdEx grew by 6.4% in December and 5.9% for Sep-Dec.

SPH tracking well to achieve or even exceed our projections. SPH is well on track to meet or even exceed our projected AdEx increase of 3.6% in FY07 (compared to 2.1% in FY05 and 1% in FY06). Thus, earnings from the publishing business could possibly grow by more than the 7% we have projected for FY07.

Sky@eleven could fetch more than we expect. Given its positioning as a high-end condominium project, with large four-bedroom apartments and penthouses, and as the tallest residential project in its area, we believe there is upside to our estimated average selling price of S$850psf for this development. Prices have been reported in newspapers as potentially being in the range of S$900-S$1200 psf.

Maintain BUY, TP S$5.20. We like SPH for its rebounding publishing business, and as a proxy for Singapore’s economic growth, given its exposure to the domestic property (both retail and residential) and media sectors. Our 12-month target price of S$5.20 implies potential upside of 16.1%, on top of an attractive projected yield of 6.3%.

-- Edited by KK at 08:27, 2007-01-22

Extracted from Asiaone:

SPH Video news on-demand channel now showing on M2btv

By Irene Ngoo - Jan 17, 2007
AsiaOne

News junkies and busy professionals who have missed the latest news can now catch it on broadband TV.

From today, they can tune in to SPH Video News channel on M2Btv - Singapore's first broadband TV - anytime, anywhere.

Content for this news channel, which was unveiled by M2B Asia Pacific at its new showroom in Middle Road this morning, is compiled from AsiaOne, the Straits Times Interactive (STI) and STOMP, with added international coverage from The Associated Press (AP).

The SPH Video News channel also provides an interactive platform for advertisers to reach broadband-savvy consumers who want to view TV content on-demand, whenever they choose, in the comfort of their living room or from their computer screen in the office.

The news channel significantly enhances the current M2Btv's offering of 55 channels of video on-demand entertainment, ranging from local and international programming, as well as casual interactive games like Suduko. Accessed through a Pony set-box using any high speed broadband connection, the TV service also provides subscribers face-to-face video calls and messaging at no additinal charges, along with online on-demand shopping.

M2B Asia Pacific is a subsidiary of US-lited Amaru, Inc, a US-listed company, which through its subsidiaries under the M2B brand, is a leader in the broadband media entertainment business. The company has launched multiple broadband TV websites for Hollywood and Asian entertainment, education and online shopping, with over 100 channels covering diverse genres such as movies, dramas, comedies, documentaries, music, fashion, lifestyle and entertainment.

Speaking at the launch of the SPH Video News channel this morning, Mr Paul Jansen, Supervising Editor of AsiaOne and CEO of SPH Search, said the 20 video news clips which SPH is putting out daily was just a start and SPH would be scaling up its capabilities to provide more videos later. He said that the SPH staff behind the video news content management have extensive experience in multi-media and broadcast work.

"We are already producing content that is not only newsworthy but also award-winning on our various online sites. The public is already aware of the quality that SPH is capable of. Now, they can get our consolidated and enhanced news on a different platform," he said adding: "SPH news channel leverages on those clips and our strengths: strong newsrooms, a extensive bureau network, and our experience in producing videos from our MediaWorks operations, which had won a number of awards."

Mr James Heng, Executive Vice President of SPH New Media, said that SPH decided to partner M2b because it is an opportunity to extend its rich content to the TV platform.

"We have content in print, on the web and on the mobile. TV will be the next platform to complete our stable of products. As a media company, SPH must broaden its distribution and reach to as wide an audience as possible. That will be the direction we should take."

Asked why M2B has chosen SPH as its strategic partner, Mr Colin Binny, CEO of Amaru, Inc, told AsiaOne: "SPH is the premier content provider of newspaper content in Singapore. This strategic partnership with SPH to put news on M2Btv would be of tremendous value for the public, and also for our advertisers. "

On whether M2B would start a similar Chinese video news channel and tap SPH Chinese newspaper resources for this, he said: "We have plans to launch a Chinese version of M2Btv by Chinese New Year for our Chinese viewers. Ideally, the next step is to put the news out in Mandarin. I think that would complement our Chinese viewership which is growing at a very fast pace.

"This is something we hope that SPH would want to do with us, going forward."

M2B also announched several goodies in store for its subscribers at today's launch. These include:

Showing the Hollywood blockbuster The Da Vinci Code, exclusively from Sony Pictures, and Hong Kong action serial The Eliminators on M2Btv by end of January.

# A Karaoke on-demand channel with over 10,000 English and Chinese songs by early February, and
# An original high-definition Singapore documentary series, titled Facets of a Nation, hosted by well-known local actor Lim Kay
# Tong and produced by Sitting in Pictures, chronicling iconic Singapore landmarks. This will be available in the second half of the year.

Mr Binny said the market response to M2B video on-demand has been "better than expected" and "we are on-target to sign up 10,000 subscribers by mid-year."

M2B has also signed up several distributions deals with major players like Harvey Norman, where each purchase of LCD, plasma or conventional TV will come bundled with a 12-month subscription.

AsiaOne registered users can look forward to a special subscription offer. So look out for details to come.

Extracts fm CIMB report dated 9-Jan-07,

Steady recovery of core media business

• 1Q07 recurring net profit in line with consensus and our estimates. 1Q07 net earnings of S$112m (+14.1% yoy) represent 27% of our full-year forecast.

• Core print media revenue improved slowly. Print advertising revenue came in at S$183m (+2.7% yoy), underpinned by a strong Classifieds segment, where revenue improved 8.1% yoy to S$66m. Revenue was further boosted by magazine turnover of S$15m (+9.6% yoy), thanks to an enlarged stable of magazine titles. However, display revenue of S$103m (-1.4% yoy) took away the shine, possibly due to rate hikes and the influx of alternative sources of advertising media. Nevertheless, we think that Classifieds will continue to boom thanks to secondarymarket property sales.

• Margins improved as cost pressures were well contained. Operating costs were up only 3.3% yoy on the back of higher material costs (+2.7% yoy). Staff costs (41% of overall costs) also increased 2.7% yoy, in line with higher headcount at the editorial products, outdoor and other media businesses. The group, however, was able to manage the cost pressure well. It is holding newsprint inventory that can last till end-1H07, locked in at prices that are significantly below our assumption of US$625/tonne (Figure 2). As a result, EBITDA margin improved by 40bp to 46%.

• Outlook remains positive. Management expects healthy print advertising revenue growth with circulation sales remaining at sustainable levels. The buoyant property market also offers enhanced rental income from Paragon while SPH’s Thomson Road development project is scheduled for launch sometime in 1HCY07.

• Maintaining earnings estimates, Outperform rating and target price of S$5.02, based on sum-of-the-parts valuation. Our target price translates into 19x CY07 P/E, justifiable given SPH’s status as Singapore’s premier print publisher, its high dividend payout (around 100%), ROE of about 20% and decent forward yields of 5.7-6.7% for FY07-09.

Extracts fm CitiGrp report dated 8-Jan-07,

Buy: Higher Investment Gains Boost Profits

 Profits up 14% due to higher investment income — Net profit of S$112.3m for 1Q07 was bolstered by stronger investment income, while core media profits grew 4.5%.

 Media revenues rose 2.6% — Although classified ad growth remained strong at 7.8%, total ad revenues were dragged by the 1.3% decline in display ads. While we had hoped for display ads to turn positive in the quarter, the slight decline was an improvement from the declines of 5.7% and 7.5% seen in previous two quarters.

 Paragon saw 7% rise in revenues — Operating profit from property grew 18% as margins expanded with higher rental reversions.

 Costs were well contained — Staff costs and newsprint costs rose 2.7% in 1Q07, suggesting that costs are well contained.

 Maintaining our forecasts — While core media profits were slightly light for the quarter, this was well covered by the higher investment income. We are maintaining our group forecasts as we expect the momentum of recovery to continue while costs remain well contained.

 Reiterate Buy (1L) — Catalysts for re-rating include recovery of its core media business and launch of its Times Industrial Building. The net yield of 5.5% also looks attractive. SPH is trading below our sum of parts valuation of S$5.15 while the implied value of the core media business is at a PE of 16x FY07E EPS.

The Straits Times / The Business Times / AsiaOne News on SPH
SPH reports a 14.1% rise in net proft for Q1
Jan 8, 2007
AsiaOne

Higher revenue from publishing business and investment gains

Media giant Singapore Press Holdings today reported that its first quarter profit rose 14.1 per cent on higher revenue from investment gains and newspaper and magazine operations.

Profit before investment income for Q1 ended Nov 30 improved 4.2% to $107.3 million from $103.0 million a year ago, said an SPH statement. Net profit rose 14.1% to $112.3 million compared to $98.4 million in the corresponding quarter last year.

The Group’s operating revenue grew 4.2% to $272.0 million. Revenue for the Newspaper and Magazine operations rose 2.6% to $241.5 million while Property segment was up 7.0% to $25.6 million.

Total operating expenses at $166.8 million was up by 3.9%. Materials, consumables and broadcasting costs were higher by 5.0% mainly driven by increased newsprint costs arising from higher consumption and increased production costs on higher circulation sales from magazine operations.

Staff costs were up 2.7% mainly due to increase in headcount and annual salary increment. Total headcount as at end November 2006 was 3,562, compared to 3,471 a year ago mainly due to the launch of new editorial products and ventures into outdoor advertising and other media businesses. Depreciation charges rose 10.2% as a result of replacement of existing assets and commissioning of new editorial and other systems. Increase in other operating expenses by 3.0% was mainly attributable to operating costs associated with new business ventures and higher newspaper distribution costs.

Group investment income improved 52.4% to $29.7 million against $19.5 million last year as a result of a capital reduction exercise undertaken by an investee company, higher profit on sale of internally-managed investments and lower contribution from externally-managed investments partially offset by foreign exchange gain from forward contracts.

Commenting on the outlook for the rest of the financial year, Mr Alan Chan, Chief Executive Officer of SPH said: “The positive business climate is expected to continue providing support to the Group’s print advertisement revenue. Circulation sales are expected to remain at sustainable levels while Paragon looks set to continue to generate healthy rental yields on the back of generally bullish sentiments in the property market.

"The development of the exclusive freehold condominium along Thomson Road is underway and scheduled to be launched in first half of 2007. Barring unforeseen circumstances, the Directors expect the recurring earnings for the current financial year to be satisfactory.”

Extracts fm CitiGrp report dated 20-Dec-06,

Buy: Newspaper Ad Expenditure for 1Q Appears Encouraging

 Nov adspend appears buoyant — AC Nielsen’s advertising expenditure numbers for the month of November showed that newspaper ad expenditure jumped 10.3%. Excluding Today, the rise was still 9.7%.

 Adspend may have risen 6.1% for SPH's 1Q — Although October ad expenditure for newspapers was flat, growth in Sep and Nov may have produced a growth of 6.1% for SPH’s adspend revenues in its 1Q.

 Anecdotal evidence suggests momentum is strong — Increased display advertising from recent property launches and new campaign from retailers (ex Courts) suggest the momentum for newspaper ad expenditure is improving.

 Display ads and classified growth on track — Our forecast of 3% growth in display and 6% growth in classified appears on track for FY07. If the momentum for display ads and classified continues, there would be upside risks to our earnings.

 Reiterate Buy/Low Risk (1L) rating — Potential catalysts for rerating include improved prospects for its core media business and launch of its Times Industrial Building. The net yield of 6% also looks attractive. SPH is trading below our sum of parts valuation of S$5.15 while the implied value of the core media business is at 15x FY07E P/E.

BT, Published December 6, 2006

SPH to grow beyond print and Singapore: chairman

It will focus on core media business but will seize property opportunities

(SINGAPORE) Singapore Press Holdings will focus on expanding its core media business to boost revenue and growth going forward, but will seize property opportunities should they arise, chairman Tony Tan said yesterday. The group will pursue a new strategy that goes 'beyond Singapore and 'beyond print', he told shareholders at the company's annual general meeting yesterday. This will require substantial investments in new media. But the returns on these investments will not come overnight - they will take a couple of years at least.

As SPH develops and reshapes its media interests, it will keep an eye on the property market, following its experience with the Paragon shopping centre in Orchard Road. This is carried in the latest accounts at $1.1 billion, but fair value is about $1.5 billion. Paragon is yielding double-digit returns on SPH's equity investment. And given Paragon's strong fundamentals, SPH is committed to holding on to it for the foreseeable future, Dr Tan said.

The group is also developing an upmarket condominium on its Times Industrial Building (TIB) site in the Thomson Road area opposite Mount Pleasant Road - a move that is expected to yield a higher return than simply selling the land. The project is expected to be launched early next year. 'As a company, when there are good opportunities - for example, with the TIB land - then I think it will be foolish for SPH to not exploit them,' Dr Tan said.

'Both Paragon and the Times Industrial Building projects have enabled SPH to acquire the necessary knowledge in developing commercial and residential properties. Based on this experience, we will closely monitor developments in the property markets with a view to taking a more active role should opportunities arise.'

But property is the icing on the SPH cake - which is, and will remain, media operations. There is no intention to turn SPH from a media to a property development company, Dr Tan assured investors.

'SPH will primarily be a media company,' he said. 'That's our core business and we intend to concentrate our attention and resources on building our media business - newspapers, magazines, online media.' SPH's long-term future lies in digital and interactive media, Dr Tan stressed. 'We have set out a vision to grow SPH beyond print and beyond Singapore and have embarked on new initiatives to position the company as a premier multimedia provider of content and services in the region.'

SPH has already launched online recruitment advertising and an interactive website called 'Stomp', among other things. On the cards are new online services such as classifieds, search and directories. It will also identify new Internet applications to invest in. And it will continue to deliver its media content through mobile devices.

On the magazine front, SPH is aggressively replicating its portfolio of publications in the region. It already has a presence in Malaysia and Thailand and is seeking to grow its foothold in China, Hong Kong and Indonesia.

At the same time, the group is stepping up its offerings in the outdoor advertising sector in Singapore, having acquired MediaBoxOffice last year. It will look for more prime locations for static billboards and introduce new outdoor technology and innovations. In China, it is looking for other acquisitions and partnerships following its purchase of a 35 per cent stake in Tom Outdoor Media Group.

Dr Tan said that in the interim, while SPH's new media initiatives are growing, newspapers will remain the group's main profit generator. As such, management will continue to work in improving content, growing newspapers circulation and widening readership.

For the coming new year, however, print advertising is not expected to grow as strongly as before, as the newspaper industry grapples with the impact of new media trends, he said.

Still, he expressed confidence in SPH's prospects. 'We have a good foundation, we have excellent staff, our newspapers continue to be the premier provider of information in Singapore and I would expect that to continue for many years,' he said.

'We are also launching new on-line media, new products - for example, My Paper - and developing new revenue streams. All of these will put SPH in a very strong position to continue to deliver excellent returns to shareholders. We have also increased our dividend payout this year. And as our recurring earnings increase, shareholders will be able to look forward to increasing returns on their investments in SPH.

'Some of the long-term investments, particularly the on-line media may take us a couple of years before we produce results. We have to be patient - but that is the right direction for the future of SPH and I believe that eventually the stock market will recognise the value in our shares and stock owners will find it worthwhile to hold on to SPH shares.'

Extracted from DBS Vickers

SPH
Encouraging September AdEx Numbers

Story: AC Nielsen’s latest AdEx figures suggest that SPH’s newspaper display ad revenues for September grew by 7.7% y-o-y. This was above with Singapore’s overall September newspaper AdEx growth rate, which was 6.6%.

Point: This is the second consecutive month in which SPH’s display advertising revenue growth has outstripped that of the Singapore market and Today. We believe that competition in the local AdEx market is showing signs of stabilizing. Looking
ahead, we believe that SPH’s AdEx revenues could now track the growth of Singapore’s economy more closely, after years of lagging behind due to competition from Today. This reinforces our view that we should see an improved performance from the Group’s publishing business in FY07 and FY08.

Relevance: We maintain our BUY recommendation and target price of S$4.78, which is based on our sum-of-the-parts valuation for SPH. The stock is currently trading on attractive yields of more than 6.5%. 2006 September AdEx figures. Nielsen Media released their September advertising expenditure figures, which indicate that SPH’s newspaper (ex-Today) display advertising volume in the first month of their FY07
fiscal year grew by 7.7% from last year. This follows a similarly firm performance in August, when display volumes rose by 5.9% yoy. Expect an improved performance from publishing business this year. Earnings (EBIT) from SPH’s publishing business fell by 2% in FY06 on revenue growth of just 1.7%. However, with signs that competition in the Singapore market is stabilizing (please see inset for more details),
we believe that SPH’s AdEx revenues should now track the economy’s growth more closely. We project that earnings from the Group’s publishing business will grow by 5.7% this year on top line growth of 3.4%. Coupled with earnings contribution from the Times Development Site, we believe that SPH should enjoy firm double-digit EBIT growth over the next 2 years.

Maintain BUY, TP S$4.78. Our target price is based on sum-of-parts valuation. This can be broken down into S$3.11 for the core Newspaper business, S$1.19 for SPH’s properties and S$0.86 for the Group’s cash and investment holdings, less debt of S$0.39. We like SPH as a laggard to the STI.

Extracts fm Kim Eng Report dated 13-Oct-06,

A Low-Risk Ride on Property Up-Cycle

Results in line with expectations - Operating profit before investment income and exceptional items edged up 2.6% to S$361m. Net profit was boosted by a write-back of impairment losses for The Paragon of S$70.5m. Final DPS of S$0.17 (1- tier) was proposed, bringing total full-year DPS to S$0.24. Payout ratio on recurring earnings from media and property operations has stayed above 100% for the last four years.

Newspaper operations remained resilient - Print advertising revenue grew 1.8% to S$676.3m, while circulation revenue inched up 2% to S$209m. Although there was a slight 1.5% dip in display advertising revenue, this was mainly due to the high base in FY05 which was due to a certain one-off advertising campaign. Newsprint cost grew by a more moderate 9.2% due to greater supply from China.

Property division to become a bigger earnings contributor - Redevelopment profits from Times Industrial building could generate pre-tax profit of S$349m (assuming average selling price of S$900psf). Together with the improving rental income from The Paragon, earnings from the property division could account for 25-30% over FY07-09. Rental yield from Paragon has also improved to 6.7%, comparable to those of the REITs with prime retail malls in Orchard Road.

Greater certainty of surging dividend payouts - We reckon the frustrating wait of shareholders for the unlocking of value is finally over with the group’s recent move to redevelop the Times Industrial site. Going by its dividend payout track record of distributing at least 100% of recurring earnings from media and property, development profits should be fully distributed to shareholders, raising future dividend yields to above 7% p.a.

An alternative property play with superior dividend yields - SPH is an enticing concoction of defensive earnings and good exposure to the property up-cycle. Superior dividend yields compared to those of developers and some REITs add to its appeal. We are still fans of the stock with a 12-month price target of S$4.90 (implied FY07 dividend yield of 5.5%).

SPH reports a Full Year Net Profit of $428.5 million.

SINGAPORE, 12 October 2006 – Mainboard-listed Singapore Press Holdings Limited (SPH) today reported its full year results for year ended 31 August 2006. Profit before investment income and exceptional items improved 2.6% to $361.1 million from $351.9 million a year ago. After taking into account one-off items such as write-back of impairment losses for The Paragon this year and gain on sale of the Group’s substantial stake in StarHub Limited last year, net profit for the year was $428.5 million compared to $488.3 million in the previous financial year.

The Group’s operating revenue posted an increase of 1.4% to $1.02 billion. Revenue for the Newspaper and Magazine operations grew 1.7% to $907.0 million while Property segment rose 10.4% to $98.7 million. Total operating expenses at $670.3 million was marginally up by 0.9%. Materials, consumables and broadcasting costs were lower by 7.1% mainly attributable to cost savings from the cessation of TV broadcasting operations last year partially offset by 9.2% increase in newsprint costs arising from higher newsprint prices and consumption. Staff costs were slightly down by 0.1% mainly due to savings arising from the cessation of TV broadcasting operations offset by annual salary increment and increase in headcount. Total headcount as at end August 2006 was 3,585, compared to 3,443 a year ago mainly due to the launch of new editorial products and ventures into outdoor advertising and other media businesses. Increase in other operating expenses by 15.6% was mainly
attributable to higher operating costs associated with the new business ventures, higher premises cost incurred by The Paragon in line with increased level of activities, and staff outplacement benefits paid.

Group investment income was $81.7 million against $248.6 million last year.
Excluding the one-time gain of $128.5 million from the disposal of the Group’s substantial stake in StarHub Limited and $12.8 million income arising from a capital reduction exercise undertaken by an investee company last year, the balance variance was mainly attributable to lower contribution from externally managed investments and lower profit on sale of internally-managed investments partially offset by higher dividend income received.The exceptional gain of $66.8 million mainly arose from the write-back of impairment losses for The Paragon ($70.5 million) in view of its strong sustained valuation. This was partially offset by impairment charges pertaining to the Group’s investment in the outdoor advertising and magazine businesses. The exceptional loss of $38.5 million last year comprised mainly charges associated with the media merger and impairment of goodwill that arose from the acquisition of new magazine business.

Commenting on the outlook for the next financial year, Mr Alan Chan, Chief
Executive Officer of SPH said: “The Group’s print advertisement revenue is expected to remain stable, and despite a declining trend in global newspaper circulation sales, the Group continues to sustain its level of circulation sales. The Paragon is likely to continue returning healthy rental yields amidst the positive sentiments in the property market. The Group, being cognizant of the increasingly important role of technology in today’s media landscape, will actively pursue opportunities to leverage on technology for content creation and advertising across various media platforms. Overall, the Directors expect the recurring earnings for the current financial year to be satisfactory.” Mr Alan Chan added: “The Company will be seeking shareholders’ approval to implement a Performance Share Plan so as to enable the Company to motivate employees to achieve superior performance as well as to align the interests of employees and shareholders.”

The Directors of SPH have proposed a Final Dividend of 17 cents per share, comprising a Normal Dividend of 8 cents per share and a Special Dividend of 9 cents per share in respect of the financial year ended 31 August 2006. These dividends are on tax-exempt (one-tier) basis and will be paid on 22 December 2006. Together with the Interim Dividend paid during the year, total Dividend payout for FY 2006 will be 24 cents.

Issued by Singapore Press Holdings Limited

Extracted from UOB KayHian dated 11 Oct

Singapore Press Holdings
FY06 results preview

Typical share price rally just before release of final results. Share price rallied from S$4.04 to S$4.24 (+5%) over the last two weeks. This is within our expectation. SPH’s share price typically has a run-up in the few weeks leading to the release of its final results, in anticipation of the final dividend. The company will be announcing its FY06 results on Thursday after market close. We expect a final 1-Tier tax-exempt DPS of 15 cents (1HFY06 interim: 7 cents). It would appear that share price has already discounted the final dividend.

Advertising revenue growth remains weak. SPH is likely to report a weak advertising revenue growth. According to ACNielsen data, SPH’s advertising revenue (AR) growth was 1% in 4QFY06. There is no evidence of a pick-up in 4QFY06 despite management's earlier assertion that 3QFY06's (Mar-May 06) poor AR performance was because previous 3Q benefited from several advertising campaigns that did not recur this year. Management has indicated that Display AR was weak in 4QFY06, a spill-over from a weak 3QFY06.

Expect lower earnings in 4QFY06 compared to 3QFY06. We are projecting net profit (ex EI) of S$96.0m for 4QFY06, 9% lower than 3QFY06’s S$105.4m. Seasonally, 4Q is weaker than 3Q. Furthermore, continued rising newsprint cost would have eroded profit margins. For full year FY06, we are projecting net profit (ex EI) of S$384.3m or S$453.5m including EI gains which were recognised in the first nine months of FY06 (consensus: S$450.0m).

Maintain HOLD. SPH’s share price is closely linked to its AR growth. We expect share price to trade in a tight band. Upside is capped by a weak AR growth, but significant downside is unlikely as share price is supported by a high net dividend yield of 5.2%. We maintain our target price of S$4.35, which is at 10% discount to our sum-of-the-parts valuation of S$4.85. Our entry level is S$3.90 or below

Extracts fm OCBC Report dated 28-Sep-06,

Tepid growth ahead

Redeveloping Times Industrial site. SPH recently announced that it has received regulatory permission to develop the Times Industrial land into a 43-storey condominium. We estimate that net sellable area (NSA) to be about 633,119 sqft and breakeven of S$221 psf. Assuming selling price of S$750 psf, we estimate SPH could book in pre-tax profit of S$334.8m. However, as the bulk of the pretax gains is in the form of capital gains from the land, there is a good likelihood that minimal tax is payable on this project. We estimate the capital gains of about S$218m, meaning only S$116.8m could be taxable. As such, net profit to SPH could be as high as S$311.4m or about S$0.20 per share. Overall, re-developing adds about 6 cents to our previous estimate for this site.

Collaboration with Schibsted. SPH and listed Norwegian media group Schibsted ASA (SCH) formed a strategic partnership to develop online ventures in the region. This will focus on online classifieds, search and directories. Schibsted started its online activities in 2002 and contributed about 15% of Schibsted's operating profit only after 2 years. We do not expect meaningful contributions for FY07 and FY08 as the JVs gear up in content, online presence and operational activities.

Tepid growth, rising costs. Zenith Media Singapore has forecasted that print display advertising growth will be about 1% YoY. On a global scale, iMedia reports that newspapers claimed 36% of global advertising in 1995, 30% in 2005 and anticipates another 5% drop by 2015. Although SPH's advertising revenue disappointed in 3QFY06, but we anticipate a marginal 3.6% YoY advertising revenue growth in 4QFY06 due to a pick up in classifieds revenue from the current strong job market. We also expect material costs to rise with oil prices remaining above US$60/barrel and staff cost will move up in tandem with the current competitive salary structures. We are forecasting topline CAGR growth of its core business for FY06-08 of about 1.3% with operating costs rising 2.5% over the same period.

Downgrade to HOLD. Industry trends of weaker advertising growth coupled with rising costs are areas of concern although SPH's property segment through rentals should give earnings some support. We are revising our fair value to S$4.20 (previously S$5.15), based on sum-of-parts valuation. With estimated future net dividend yield of about 5.3%, it should provide support to the SPH's share price. With limited upside to the current price, we downgrade SPH to a HOLD.

Extracts fm Lim and Tan Report dated 4-Sep-06,

What Is The Direction?

• SPH has decided to redevelop the site at Thomson Road into a 43-storey condo, which management has described as an “opportunistic” project in view of:
  
  
  
  • the sustained recovery of the property market; and
    
  • the company’s prior experience with The Paragon.
  
  
• SPH added it has no plans currently to acquire new development sites.

COMMENTS

1. The decision to redevelop the Thomson Road property is disappointing. Management seems to have lost direction. It has no experience in residential property development.

2. Recall SPH sold the historic Times House (113,000 sf site) at Kim Seng for $118.88 mln in late 2003 (ie $376 psf before DC), obviously freaked out by SARS, and saw Wheelock Prop transform it into The Cosmopolitan with 228 units, now 77% sold and priced at >$1500 psf, vs $1100 psf at the time of launch in mid 2005. (Breakeven is estimated at $750- 800 psf.)

3. What’s discomforting is that while SPH has no plans currently to acquire new development sites, it implies the company may very well do so at a later stage.

4. But what is clear from the latest U-turn is that

i. The Paragon is NOT for sale, at least in the foreseeable future;

ii. Investors hoping for a special payout from Times Industrial Building, which could well have been sold through a public tender, would have to wait till completion of the new condo.

5. We believe SPH’s management should focus on its core business. Its entry into outdoor advertising, one of the fastest growing businesses globally today, is such a small step, and done via a 35% stake in Tom Outdoor Media Group, China, a Li Ka Shing controlled company.

6. Indeed, the acquisition by Fung Choi, an associate of F&N, of Flying Media of China for HK$480 mln shows the kind of deals SPH should be working on. (Flying Media has a portfolio of 15 magazines targeting different segments of the population in China.)

7. The stock could well rise, thanks to the renewed interest in property stocks, as well as the general bullishness around the world as investors once again believe in goldilocks. But it is unlikely to be sustained. Indeed, we expect SPH’s relative underperformance to continue.

8. Any strength in share price may actually be an opportunity to reduce.