Extracts fm Lim and Tan Report dated 12-Jul-06, 

Sing Post As An Alternative

• SPH’s Q3 performance is uninspiring:
  
  
  
  • Strip out the exceptional $69 mln gain arising from the write-back of the impairment loss for The Paragon, profit was down 9.5% to $125.55 mln.
    
  • The continued increase in newsprint prices was one of the contributing factors.
    
  • But advertising revenue, while up 14.6% quarter-on-quarter, was marginally lower than a year ago, despite the continued robust growth of the Singapore economy.
  
  
• The Property division posted revenue growth of 8.5%, vs 0.6% for Newspaper & Magazine, and hence the recent upward revision of Paragon’s value to $1.52 bln.
  
• But this in turn makes The Paragon that much more precious an asset to be sold and proceeds/profit distributed to shareholders, as they would expect! Indeed, the results accompanying statement stated clearly: the Directors are committed to holding on to The Paragon for the foreseeable future.
  
• Many will no doubt want to wait for what they believe will eventually materialize, hence continuing justifying a BUY, either outright (which we do not subscribe to) or for Long Term (perhaps).
  
• Indeed, if advertising revenue at SPH is not moving in tandem with economic growth, Singapore Post would appear to be an attractive alternative given the more commendable growth of its Direct Marketing business. And Sing Post’s yield is also more attractive at 5.3% net (assuming unchanged 5.5 cents for ye Mar ’07).

Extracts fm CIMB Report dated 12-Jul-06,

Some Bright Spots

• 3Q06 results were in line with consensus and our estimates. 3Q06 core net profit was S$105m (-2.6% yoy). The slight yoy decline came on the back of higher newsprint cost, which rose 12% on higher prices (US$586/MT) and consumption (typically high in 3Q). Otherwise, revenue from the core media business was flat with display (56% of ad revenue of S$510m) declining 7.5% yoy while classified (37% of ad rev) improved 9.3% yoy. 
  
• Mix bag of non-media earnings. Investment income for the quarter was down 17% yoy to S$32m due to weaker market conditions and lower trading volume. The group, however, received higher dividend income from its listed investments. There was an exceptional gain of S$69m in 3Q06 relating to the write-back of impairment losses for Paragon due to strong sustained valuation. Paragon continued to return strong rental yields, contributing S$24m (+8.3% yoy) in revenue in 3Q06. 
  
• Headcount increase could raise costs. Staff cost, which accounted for 41% of overall cost, declined 0.2% yoy due to a timing difference in the provision for staff variable bonus. Headcount increased to 3,583 (+4% yoy) in 3Q06 for its editorial products, outdoor and other media businesses, and could raise costs going forward. 
  
• Keeping Paragon. The latest valuation for Paragon is S$1.52bn (last valuation was S$1.38bn). In its most concrete statement to date, SPH said it is interested in keeping Paragon in the foreseeable future, in light of the group’s ability to enhance rental yields.
  
• Maintain Outperform and target price of S$5.40, based on sum-of-the-parts valuation. We are also maintaining our core earnings estimates. SPH offers prospective dividend yields of 6.8% and 7.6% for FY06 and FY07 respectively. Maintain Outperform on the back of attractive yields.

SPH Reports Third Quarter Net Profit Of $174.6 million

Singapore, 11 July 2006 – Mainboard-listed Singapore Press Holdings Limited (SPH) today reported results for its third quarter ended 31 May 2006. Net profit improved 80.7% to $174.6 million from $96.7 million a year ago, as a result of exceptional gain of $69.1 million compared to previous year’s exceptional loss of $11.6 million.

The Group’s operating revenue registered an increase of 2.2% over the same quarter last year. Revenue for the Newspaper and Magazine operations increased 0.6% to $237.2 million, and Property segment rose 8.3% to $24.3 million. Despite higher operating revenue, profit before investment income of $94.5 million was 8.8% lower than last year due to higher newsprint and other operating costs this year.

Total operating expenses at $173.5 million was 9.6% higher. Newsprint cost rose 12.2% as a result of higher consumption and price increase. Staff cost was marginally down 0.2% due to timing difference in provision for staff variable bonus partially offset by increase due to annual salary increment and higher headcount. Total headcount as at end May 2006 was 3,583, compared to 3,448 a year ago mainly due to the launch of new editorial products and ventures into outdoor and other media businesses. Similarly, other expenses were higher as a result of costs associated with activities in outdoor and other media businesses. In addition, there was no write-back of allowance for doubtful debts as in the previous year.

Group investment income for the quarter was $31.5 million, down from $38.0 million last year. The decreases in contribution from externally-managed investments and profit on sale of internally-managed investments due to poorer market conditions and lower trading volume this year were partially offset by increase in dividend income received.

The fair value of The Paragon, determined based on a recent independent professional valuation, is $1.52 billion. This valuation, which is done on an annual basis, is required under the terms of the bank loan for The Paragon.

The exceptional gain of $69.1 million this year was mainly in relation to the write-back of impairment losses of $70.5 million for The Paragon in view of its strong sustained valuation. The gain was offset by impairment provision of $1.4 million arising from the acquisition of SPHMBO. The exceptional loss last year pertained to charges associated with the media merger.

Mr Alan Chan, Chief Executive Officer of SPH said: “The valuation of The Paragon is expected to stay healthy on the back of a sustained recovery in the property market. Together with on-going efforts to enhance rental yields, the fundamentals of The Paragon remain strong. In view of this, the Directors are committed to holding on to The Paragon for the foreseeable future.”

For the nine months ended 31 May 2006, the Group registered a net profit of $357.6 million against previous year’s $413.3 million. This year included $70.5 million of write-back of impairment losses for The Paragon while previous year included $128.5 million gain on sale of a substantial portion of the Group’s stake in Starhub Ltd.

Commenting on the outlook for the rest of the financial year, Mr Alan Chan said: “Barring unforeseen circumstances, Singapore’s economic outlook for 2006 remains healthy. Nonetheless, business and consumer sentiments remain shaped by concerns over the geopolitical and global economic environment in areas such as pressure on oil prices, rising interest rates, threats of terrorism and an avian flu pandemic. Overall, the Directors expect the recurring earnings for the current financial year to be satisfactory.”

Extracts fm Credit Suisse Report dated 3-Jul-06,

Display ad demand still patchy; pushing pan-Asia ambitions through outdoor sector

• According to the CS Page Monitor, recruitment ad growth for SPH accelerated further, but demand for display ads slowed slightly in June. Despite strong economic growth and consumer sentiment in Singapore, display ad demand for SPH remained patchy. As we have highlighted before, we expect the company’ 3Q FY06 results (scheduled for 11 July) to be weak, with display ad revenue probably growing only 3% YoY.
  
• Following recent initiatives to revamp and expand its businesses both domestically and overseas, SPH is keen to continue growing , especially overseas. The company will be focusing on the Internet, magazines and outdoor sectors. While we believe the company is moving in the right direction, and that the bottom-line impact of these is unlikely to be apparent in the near term.
  
• SPH has an above-average net dividend yield of 5.5% (versus its five-year average of 4.6% and the market’ 3.9%). Reversion to five-year mean of 4.6% would imply a target price of S$5.00. We maintain our OUTPERFORM rating with a target price of S$4.96.

SINGAPORE Press Holdings (SPH) said yesterday it had not reached a decision on the sale of its Paragon shopping mall, one of Singapore's swankiest and worth $1.52 billion, after a 10 per cent rise in the mall's value. SPH, South-east Asia's largest media group, said last December it may wait for real estate prices to rise further before it sells the mall. 'The response has always been that it could be sold when the price is right but this position has not been reached yet,' an SPH spokesman said yesterday.

The company said the mall was worth 10 per cent more than the $1.38 billion announced last December. It disclosed yesterday that Knight Frank valued the mall at $1.52 billion.

SPH's chief executive officer Alan Chan said last December that Paragon was earning a return of 10 per cent annually and that the value of the mall on Orchard Road had risen by 15 per cent over the last two years.

Property values along Orchard Road, which is undergoing a much-needed face-lift, may rise further after the government sold an undeveloped prime site for $1.38 billion.

Mr Chan said Paragon could be sold to investors as a real estate investment trust, although SPH was considering several options.

SPH is the leading media company in Singapore. It publishes more than 10 newspapers in the four official languages and more than 80 magazine titles. - Reuters

Lacks leverage

Competition and higher costs
While we expect Singapore Press Holdings’ (SPH) advertising revenue to benefit from the current economic cycle, the magnitude of the multiplier effect should be more modest because of competition from other media platforms. Compounding this is rising newsprint costs, which means that leverage into an expanding economy is further reduced.

Divestment not imminent
We estimate that SPH’s investment properties could command an extra S$0.30 per share in valuation in a reflationary environment; however, we do not expect any divestments in the near term and therefore no share buybacks or special dividends.

Nice yield, but not spectacular
A 95% payout of core earnings in recent years has meant an attractive yield, but in the current rising interest rate environment, we think a 5% net yield is unlikely to be an attractive catalyst for stock performance.

Valuation: Price target of S$4.90
The stock trades at 17.8x our 2006 estimate with a net dividend yield of 5%. Our price target is S$4.90, based on a sum-of-the-parts valuation with S$0.85 for its non-core business and DCF for its core business. We maintain our Neutral 1 rating as we think the stock is fairly valued and lacks a catalyst for an outperformance.

Extracts fm Lim and Tan Report dated 13-Apr-06, 

Another Yawn

• SPH’ results for Q2 ended Feb’06 are uninspiring:
  
  
  
  • Reported net profit fell 11.9% to $84.56 mln. (Up 0.7% to $83.1 mln before investment income and exceptional items.)
    
  • Best performance came from the property division, with rental largely from The Paragon up 11.5% to $25.0 mln.
    
  • Investment income fell to $19.52 mln from $45.26 mln, partly because of the weak US$, which affected externally managed investments.
    
  • Newspaper business did alright with advertising rising 4.3%, benefiting from a stronger economy.
    
  • Operating costs rose because of higher newsprint prices.
  
  
• Dividend is maintained at 7 cents net per share.
  
• Balance sheet remains strong, with:
  
  
  
  • cash of $121.99 mln;
    
  • short term investments of $564.95 mln;
    
  • long-term investments of $418.43 mln; and
    
  • borrowings of $631.78 mln.
  
  
• As for outlook, management warns of “high oil prices, avian flu, terrorism threats”.

COMMENTS

1. As we had recently commented, the various announced initiatives (stake in Tom Outdoor Media, China; a new Chinese morning freesheet, and the launch of ST701 on-line classified advertising) are not significant enough to arrest the underperformance of the stock relative to the general market.
   
2. And, we maintain to merit a more positive recommendation than a Long Term Buy, other initiatives need to be considered:
   
   
   
   • securitization / sale of The Paragon;
     
   • commitment to a clear and more generous dividend policy.

Still a yield play

A subdued set of 2Q results. Singapore Press Holdings (SPH) yesterday reported a set of modest results for 2QFY06. Revenue grew 2.1% YoY to S$241.7m in 2QFY06, with core operating income rising just 0.7% YoY to S$83.1m. Net income declined 11.9% YoY to S$84.6m, due to the absence of disposal gains in the current quarter. However, core operating income for 1HFY06 saw a decent gain of 8.4% YoY to S$186m, as tight controls on operating costs offset rising newsprint prices. Newsprint charge-out price saw a sharp 11.5% YoY rise to US$573/MT in 1HFY06, which was offset by lower staff costs and savings from the cessation of broadcasting operations. Net investment income plunged 80.3% YoY to S$39.0m in 1HFY06, due to a weaker US$ and higher interest rates. Annualizing the figure, this implies that investment returns came in at about 7.4% for its investment portfolio of S$1.1b (42.7% in equities, 35.0% externally managed, 11.3% in deposits, and 11.1% bonds).

Riding on positive domestic outlook. SPH’s earnings growth this year is well supported by healthy economic growth of 4-6% (we expect it should hit the top end of the range) and robust consumer spending from the S$2.6b Progress Package. Cash payments from the Progress Package range from S$200 to S$800 per person, and the impact on SPH is likely to be felt in 2HFY06. Management however was reticent about a timeframe for the disposal of non-core assets, noting the 10% equity returns from Paragon.

An attractive yield play with upside from non-core assets. With 1HFY06 earnings coming in at S$183m on the back of S$505m revenue, our full year earnings forecast of S$387m should remain on track. We continue to maintain our fair value of S$5.15, based on sum-of-the-parts valuation metric, with core operations valued at S$4.30. SPH declared an interim dividend (one-tier tax exempt) of 7 cents. While the windfall from non-core asset disposals may take some time to materialize, SPH remains an attractive yield play with estimated net dividend yields of 6% in FY06 and FY07. Our rating for SPH stays as a BUY for its dividend yield and the potential upside from the divestment of its non-core assets.

SINGAPORE Press Holdings (SPH) will take a 35 per cent stake in the billboard unit of TOM Group Ltd, a publishing, advertising and Internet company controlled by Hong Kong billionaire Li Ka-shing.

SPH and TOM jointly announced a strategic partnership in which SPH will invest US$26 million in TOM Outdoor Media Group (OMG) at an implied value of approximately US$105 million, which includes an existing shareholder loan to OMG of US$30.8 million from TOM. TOM will maintain a 65 per cent stake in OMG.

The partnership enables TOM and SPH to leverage their respective strengths and add value to OMG's business, said SPH. OMG operates a diverse network of advertising billboards and unipoles in China, complemented by street furniture and transport advertising. It owns a billboard network of about 300,000 sq-m spanning over 60 mainland cities, and has 16 subsidiaries providing comprehensive nationwide advertising solutions. -- BT

BT, Published March 9, 2006
 
SPH launches free Chinese newspaper
Paper will be available from Tuesday to Saturday, starting June 1

(SINGAPORE) Media group Singapore Press Holdings (SPH) is launching a free Chinese morning newspaper - Singapore's first - on June 1.

The paper, to be available daily from Tuesday to Saturday, will be 'light, eye-pleasing and easy to read'. It will be distributed to MRT stations, offices, tertiary institutions and selected households and shopping centres. Its name will be unveiled when it is officially launched.  The contemporary, informative and entertaining paper will have a high degree of reader participation via news alerts, story and picture contributions as well as opinion pieces.

SPH chairman Tony Tan said the paper will complement the group's stable of highly regarded Chinese newspapers.

'Zaobao is a Chinese newspaper of considerable reputation and international recognition whilst SPH's two evening newspapers, Lianhe Wanbao and Shin Min Daily News, cater to the needs of a sizeable readership with interests in lifestyle and human-interest stories,' Dr Tan said.  'However, we recognise that the readers' tastes and needs evolve with changing lifestyle, trends and command of the language. Thus, to cater to our wide spectrum of readers, SPH aims to provide a full suite of Chinese newspaper products across different time-belts, with each offering a fulfilling reading experience and unique perspective on events happening around them, using language ideally suited for the audience,' Dr Tan added. He said the free paper would fill a gap for a quick and light read in the morning. SPH said it will be written in 'contemporary, easy-to-read Chinese which even younger readers with a CL2 background will find interesting and absorbing'.

SPH chief executive Alan Chan said the group is ever conscious of the need to ensure that its readers' expectations are met, and will continually improve its newspapers - including Lianhe Zaobao - to meet these expectations. 'We will continuously develop Zaobao in ways that our readers want us to, but without compromising its in-depth and analytical coverage,' said Mr Chan. He said the free paper is also in line with the group's continuing efforts to nurture local journalistic talent. 'To prepare for this newspaper, we will not just be hiring fresh talent, we will also be offering more places in the SPH Chinese Journalism Scholarship to meet our long term needs,' said Mr Chan.

To be led by editor Goh Sin Teck, 42, and associate editor Chua Chim Kang, 40, the free newspaper will have a team of journalists who are in their 20s and 30s.

Responding to press queries, SPH said the free paper will not require significant investments as SPH will be leveraging on its existing infrastructure and the resources of its current stable of newspapers. 'There will be operational expenses for newsprint and distribution, and some additional costs from hiring more journalists,' said SPH.

The launch is not expected to have a material impact on the earnings and net tangible assets per share of SPH for its current financial year ending Aug 31.
 

- The Singapore FY06/07 budget is expected to boost GDP growth and consumer sentiments and spending and we believe that SPH is a beneficiary. 

- Also, the move to allow tax deduction to share-based compensation through treasury shares should encourage the company to start buying back shares as well as boost earnings.

- Largely on the back of higher ad revenue forecast, we have raised our FY06 and FY07 earnings forecast by 4%. We have also raised our sum-of-the-parts based target price by 7% to S$5.10. This represents 18% upside from current levels.

- Plus, revaluing Paragon based on recent transactions of comparable assets could raise our target price to S$5.31.

- At 16.8x FY06E earnings, the stock is at the low end of its historical PE range. Even without any additional cash distribution, the stock has an attractive dividend yield of 5.3%.

- Hence, we are upgrading our rating to OUTPEFORM (from Neutral) with a target price of S$5.10.

Extracts fm OCBC Report dated 13-Jan-06,

Core earnings edged higher

• Core operations strengthened further. Singapore Press Holdings (SPH) yesterday reported a set of encouraging results at the core level for 1Q06, as the Group continued to benefit from the media merger in 2004 and strong economic growth especially in the second half of 2005. Operating margins also improved significantly compared to a year ago. Operating revenue rose 2.2% YoY to S$235.3m in 1Q06, while operating profits before investment income jumped 15.5% YoY to S$103m. Though net profit saw a significant 55.4% YoY decline to S$98.5m, it is slightly ahead of our expectation of S$97m. Excluding the S$128.5m gain from the disposal of StarHub in 1Q05, net profit actually rose 6.6% YoY.
  
  
• Enjoying the fruits of rationalization. Print ad revenue rose 3.1% YoY to S$178.8m as ex-Streats ad revenue grew at a stronger pace than in 1Q05, with display ad gaining 6.7% YoY vs. 1.3% YoY in 1Q05. On the cost side, higher newsprint cost was offset by the cessation of TV broadcasting business, driving overall material and consumables costs down by 31% YoY. As a result, operating margins improved strongly to 39% in 1Q06 compared to 34% in 1Q05 and was marginally ahead compared to 38% in FY05.
  
  
• Pricing power improving. Overall, the results were heartening and the outlook for SPH remains positive as the domestic economy is set to expand at a steady pace in 2006. This allows for more pricing power with new ad rate increases going into effect from January 2006 (for weekend Straits Times and Sunday Times) and from 1 Nov 2005 for the two Chinese evening dailies. Key events ahead (such as the Asian Aerospace, World Cup soccer finals and IMF/World Bank meetings) and improving domestic consumer sentiment are expected to be the key drivers for circulations and ad revenues.
  
  
• Recent price weakness is excessive. As for valuation, we continue to have a fair value of S$5.15 for SPH based on sum-of-the-parts, with core operations valued at S$4.28 and non-core assets at 87 cents. Given the positive outlook, potential price upside and good dividend yield, we view the recent weakness in SPH’s share price as excessive. Maintain BUY.

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

Patience pays

• Operating results were in line with our expectation. Net profit for the quarter of $98.4m accounted for 24% of our full-year forecast of $418m. Consensus estimate for full-year net profit stood at $420m. Operating profit excluding exceptionals, grew 15.5%yoy to $103m as operating margin improved to pre-media liberalisation level of 39% from 33.6% a year ago, thanks to the cessation of it TV operations.
  
  
• Modest growth in newspaper advertising revenue was expected. Newspaper advertising revenue edged up 2.2%yoy to $165.6m partly due to cessation of Streats since Jan 2005. Excluding the impact of Streats, ad revenue would have grown by 5%yoy, in line with our assumption of 5% increase for the full-year.
  
  
• In familiar turf. Following the rationalisation of the media industry with SPH effectively exiting the loss-making TV business and taking a 40% stake in its only print media competitor, TODAY, we expect SPH to power up on its monopolistic position. In addition, key cost components such as newsprint and staff costs are well-managed. Operating leverage will boost earnings as advertising demand grow in tandem with the economy.
  
  
• Cash pile is reaching ‘embarrassing’ level. With strong free cash flow from its newspaper operation and rental income from the Paragon retail mall, the group’s investment portfolio has reached $1.3b ($0.82/share) as at Nov 2005. The cash hoard could be a major drag on balance sheet efficiency. Hence, we expect capital management exercise in the pipeline
  
  
• The time is now. We are upgrading the stock to a Buy as the correction in share price following the disappointing dividend payout last year, has brought valuations back to attractive levels with implied core earnings multiple at 13.7x for FY06 and dividend yield of 5.8%.