Singapore Press Holdings: Dividend play

Singapore Press Holdings: Dividend play for a shaky market

Summary: The recent volatility in the market caused by concerns over the cooling US and Chinese economies have made investors rebalance their portfolios to yield stocks to obtain some downside protection. Recent business surveys by EDB and the Dept of Stats in Feb 07 have also indicated a dampening of optimism by Singapore companies going into 2007. We anticipate SPH to remain cash generative, retain its good net profit margins of >35% (excluding exceptionals) and bank on the relative stability of its print business which trails Singapore?s economic performance. However, we do not expect the print business to rebound strongly and view 2Q07 to be an indicative test of SPH?s efficacy of cost control implementation that was evident in 1Q07. Previously, positive sentiment over its one-off property venture has boosted SPH?s stock price performance. However, recent uncertainties in the major economies such as the US and China have introduced caution into the market. We think that SPH?s FY07 net dividend yield at about 5% gives investors reasonable downside protection. We maintain our HOLD rating with fair value of S$4.44. (Kelly Chia)