Brokers' Take

Singapore Press Holdings
Jan 9 close: $4.44
CITIGROUP RESEARCH, Jan 9

Profits up 14 per cent due to higher investment income: Net profit of $112.3 million for 1Q07 was bolstered by stronger investment income, while core media profits grew 4.5 per cent.

Media revenues rose 2.6 per cent: Although classified ad growth remained strong at 7.8 per cent, total ad revenues were dragged by the 1.3 per cent 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 per cent and 7.5 per cent seen in previous two quarters.

Paragon saw 7 per cent rise in revenues: Operating profit from property grew 18 per cent as margins expanded with higher rental reversions.

Costs well-contained: Staff costs and newsprint costs rose 2.7 per cent 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': Catalysts for re-rating include recovery of its core media business and launch of its Times Industrial Building site project. The net yield of 5.5 per cent also looks attractive. SPH is trading below our sum- of-parts valuation of $5.15, while the implied value of the core media business is at a PE of 16 times FY07E EPS.

BUY