BUY: Kim Eng Research - Oct 30, 2008 (BT)

BackOct 30, 2008

Brokers' Take

BUY: Kim Eng Research

Oct 30, 2008
The Business Times


Singapore Press Holdings
Oct 29 close: $3.24
Kim Eng Research, Oct 29

SINGAPORE Press Holdings (SPH) has further corrected since our last report on Oct 13. The current implied PE of the core media business at 12 times is close to the 10-year trough PE of 11.8 times. At the current price, the market seems to have already priced in a 25 per cent decline in core media earnings - the worst-ever scenario in SPH's operating history. In our view, we do not expect a decline of such a magnitude.

We maintain our view that development earnings from Sky@Eleven will flow in progressively over FY2009-2010 to mitigate any impact of revenue decline in the media business. Our FY2009 dividend per share estimate of 28.8 cents is conservative and is below consensus estimates. Investors can potentially be rewarded with a dividend yield of 8.7 per cent for FY2009. SPH's FY2008 final dividend of 19 cents alone assures a decent dividend yield of 5.7 per cent. The stock will trade ex-dividend on Dec 9.

Despite the irrational selldown, SPH has been given a vote of confidence through an open market purchase of 350,000 shares between Oct 21 and 24 by chairman of the board Tony Tan at $3.36-3.39.

Our base-case sum-of-the-parts TP is maintained at $5.11. Our discounted cashflow-based valuation of the core media business alone yields $3.50 per share, assuming 7.4 per cent weighted average cost of capital and 2 per cent terminal growth rate. Risks to our TP are: 1) delay in development revenue recognition; 2) management's inability to pass on higher operating costs through the cover price increases; and 3) further appreciation of the US dollar against the Singapore dollar, which will affect newsprint cost.


Compiled by Jamie Lee