date for FY08 (September to July), Nielsen Media’s estimates indicate that SPH’s display and classified volumes have risen by 6.9% yoy.
Point: We believe that these figures indicate that SPH is right on track to meet our assumption of 7% yoy growth in display and classified ad volumes for FY08, reflecting robust domestic consumption spending in Singapore thus far. Whilst growth in advertising revenue is expected to slow down, we remain positive on the Group’s longer-term prospects given its monopolistic position in print advertising, attractive property asset i.e. The Paragon and strong balance sheet. All these translate to firm, growing cash flows for SPH, which should help to continue to support the stock’s generous dividend payouts.
We expect SPH to reports its 4Q and FY08 results around mid-October and are projecting the Group to propose a final net dividend of 24cts (interim dividend was 8cts), given continued growth in its core publishing business, higher property rental income and further revenue recognition from the Sky@Eleven residential development.
Relevance: We continue to like SPH for its attractive valuation and as a defensive stock, backed by a net yield of >7.5% (premised on 90% payout of EBIT; in line with last 6 years), and re-iterate our BUY call. Our sum of the parts valuation for SPH is S$5.75.
Sgbluechip says: There are often many positive reports on SPH, many stating its fair value above $5. However, for the past 3 years, it has never gone beyond $4.82. DBS Vickers is projecting a total dividend of 32 cents per share which is unrealistic as it is only projecting net EPS of 32 cents for FY 08, which is what SPH earned for FY 07.
I think the CFA analyst is overly optimistic!
It is unlikely SPH can surpass last year results due to poorer investment income so I am projecting its FY 08 EPS to be 29 cents.
Final dividend per share should be 16-18 cents per share due to the one tier tax system. In the worst case scenario, dividend per share should be 15 cents per share after tax. In the best case scenario, dividend per share will be 20 cents per share.
It is likely SPH will go up to $4.40 upon nearing of dividend payout date. There is 30 cents or 7% upside for this stock at last traded price of $4.11.