By Kevin Tan
Tue, 13 Jul 2010, 09:12:23 SGT

Singapore Press Holdings (SPH) reported 3QFY10 revenue increase of 26.9% YoY to S$415.0m and PATMI increase of 29.9% YoY to S$164.6m. The results were significantly better than expected due to a strong rebound in print advertisement revenue (+28.1% YoY) and higher contribution from its property segment (+43.4% YoY). Going forward, management expects the print advertisement revenue to continue to move in tandem with the domestic economy. On its property front, SPH also updated that the Clementi Mall is on track to commence operations in 1H11 and that Paragon is expected to maintain its high occupancy level, thus providing a steady recurrent income stream for the group. In view of the strong results and positive outlook, we raise our FY10-11 forecasts by 7.7-15.3%. Due to the upward revision in earnings, coupled with the recent revaluation of Paragon by Knight Frank to S$2,280m (from S$1,980m in Jul 2009), our SOTP fair value is now lifted to S$4.63, up from S$4.31 previously. At an attractive 17.8% potential upside, backed by a sturdy 5.9% FY11F dividend yield, we maintain our BUY rating on SPH.

Above expectations. Singapore Press Holdings (SPH) reported its 3QFY10 results last evening, with revenue up 26.9% YoY (+30.2% QoQ) to S$415.0m and PATMI up 29.9% YoY (+45.2% QoQ) to S$164.6m. The results were significantly better than expected due to a strong rebound in print advertisement revenue (+28.1% YoY) and higher contribution from its property segment (+43.4% YoY due mainly to higher revenue from Sky@eleven which obtained its TOP in May 2010). For 9MFY10, revenue crossed the S$1b mark to reach S$1,087.6m (+14.0%), while PATMI hit S$422.6m (+47.4%). This compares to our FY10F sales and earnings forecasts of S$1,293.4m and S$462.1m respectively, or 84.8% and 91.5% of our full-year turnover and PATMI estimates.

Outlook remains sanguine. Going forward, management expects the print advertisement revenue to continue to move in tandem with the domestic economy (which in our view is positive as the Ministry of Trade and Industry Singapore is projecting a 7-9% GDP growth in 2010). However, newsprint prices are likely to rise due to cost pressures, hence potentially increasing the newsprint charge-out rates. In addition, staff costs are expected to rise amid higher bonus provisions. On its property front, SPH updated that the Clementi Mall is on track to commence operations in 1H11. Its prime retail and office complex Paragon is expected to maintain its high occupancy level, thus providing a steady recurrent income stream for the group. Overall, SPH also guided that its financial performance in FY10 is likely to be better than that of previous fiscal year, barring unforeseen circumstances.

Maintain BUY with higher fair value of S$4.63. SPH has outperformed both our and market expectations for two straight quarters. In view of the strong results and positive outlook, we therefore believe that the group is likely to gain further traction within its various business segments. As such, we again raise our FY10-11 forecasts by 7.7-15.3%. With the group entering into 4Q, we also roll our valuations to FY11. Due to the upward revision in earnings, coupled with the recent revaluation of Paragon by Knight Frank to S$2,280m (from S$1,980m in Jul 2009), our SOTP fair value is now raised to S$4.63, up from S$4.31 previously. At an attractive 17.8% potential upside, backed by a sturdy 5.9% FY11F dividend yield, we maintain our BUY rating on SPH.