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SPH & Raffles Education (17 Jan 2011)
 
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SPH & Raffles Education (17 Jan 2011)

By Carmen Lee
Mon, 17 Jan 2011, 08:28:01 SGT

Market Pulse: SPH & Raffles Education (17 Jan 2011)

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Singapore Press Holdings: Robust 1Q11 performance

Summary:
Singapore Press Holdings (SPH) delivered its 1Q11 results with revenue of S$318.7m (-10.0% YoY) and net profit of S$102.3m (-29.3% YoY). The decline was attributed to the absence of revenue recognition from Sky@eleven, which was completed in May 10. Excluding this, the group’s comparable revenue grew 12.3% YoY, while recurring earnings improved by 6.6%. SPH’s 1Q11 performance was driven by broad-based revenue growth across all segments. Going forward, we expect its performance to be supported by stronger advertising demand alongside Singapore’s economic growth and improving consumer confidence, as well as contributions from Clementi Mall, which is slated for official opening in Apr 11. Our earnings projections and S$4.59 fair value estimate remain intact. Dividend yield is attractive at ~6%. We maintain our BUY rating on SPH. (Research Team)

Raffles Education: Acquisition of Merchant Square

Summary:
Raffles Education Corp (REC) announced that it would be acquiring Merchant Square, which is a 99-year leasehold office with a total NLA of 50,262 sf, for S$65m. Merchant Square would be used for REC’s Singapore campus when its lease expires in Jan CY13. Management has highlighted that the acquisition will allow the company to secure a permanent place of business as compared to sourcing for a new leased premise. We estimate that the bulk of the acquisition will be financed by mortgage loans with the remainder funded by internal cashflows. We incorporate higher interest expenses into our assumptions, partially offset by rental income from current tenants before REC begins renovation works towards the end of CY12. As a result, our fair value estimate decreases marginally from S$0.285 to S$0.28 (still based on 18x FY11F EPS); although we wish to highlight that REC will experience a reduction in rental expenses when its Singapore campus’s lease expires. Maintain HOLD. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.com for detailed report.

NEWS HEADLINES

- The MAS has stepped in to close a loophole on mortgage equity financing, by imposing the same lower loan limits as the latest property measures.

- The instant success of shoebox residential units has drawn some developers to adopt the same strategy for industrial projects – to target investors and speculators thwarted by restrictions on trading in residential properties.

- CapitaLand chief executive Liew Mun Leong expects private home prices and sales volume to fall following the latest round of government measures to cool the property market.

- XMH Holdings is seeking to raise S$18.85 m after expenses from its mainboard IPO, the first one registered with the MAS this year.

- SingTel has been handed a S$130k fine by the government for breaching the Republic's Telecom Competition Code, its second brush with local authorities in the last six months.

- The Style Merchants is divesting its gaming business to Marvel Day Enterprises for US$250k, which will enable the company to focus on its core business of fashion retail.

- Jets Technics International reported a net profit of HK$2.23m in 1HFY11, as compared to a net profit of HK$849k in 1HFY10.

- International Press Softcom warned that it expects to record a loss position for 2H10.

- Japan Land reported a net profit of S$552k for 2QFY11, versus a loss of S$7.12m in 2QFY10.



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For and on behalf of OCBC Investment Research Private Limited:

Carmen Lee
Head of Research

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