Monday, September 30, 2013

SPH: Yield attractions (DBSV)

BUY S$4.10;
Yield attractions;
Price Target : 12-month S$ 4.53 (Prev S$ 4.75)
By: Andy SIM  CFA +65 6398 7969;

•Expect final/special DPS of 16Scts with payout in Dec, equating to 4% yield for a c.10-week period
•Muted earnings priced in; rebound likely with recent upward GDP revisions
•Financials can comfortably support another 20 to 30 Scts/share payout, on top of 22 Scts in FY14F
•Reiterate BUY, TP revised to S$4.53

Expect 16 Scts final/special DPS. In SPH’s upcoming full year results (11 Oct 2013), we expect final/special DPS of 16 Scts. This will bring total DPS paid/proposed for FY13 to 41 Scts, representing a yield of 10%.  SPH shares usually trade ex-final/special dividend within the first 2 weeks of Dec, and based on our expectations for 16 Scts DPS, this equates to a yield of 4% for a 10-week holding period.  We believe this is attractive, and limits downside risks during this period.

Muted earnings priced in.  Given consensus’ earnings downgrade of 8% in the past year since Aug’12, we believe the market has largely priced in a weak set of operating results amid an uncertain macro environment. Going forward, we believe earnings could improve, going by recent upward adjustments to consensus’ 2013 GDP growth forecast for Singapore. We also noted that AdEx growth for the period from May to Aug’13 has been stronger y-o-y.

Potential for higher payout.  With the listing of SPH REIT, we project that SPH’s cash pile has risen to c.S$1.1bn. We estimate SPH can well afford to pay out at least another 20-30 Scts per share, on top of its usual DPS (FY14F: 22 Scts) to shareholders while net gearing still remains at a healthy 0.30x to 0.37x, up from an estimated 0.18x at end-FY14F.

Reiterate BUY, S$4.53 TP. We reiterate our BUY recommendation, with TP adjusted to S$4.53 (from S$4.75) to account for the S$0.18 special DPS paid in Aug and 5-10% cut to our earnings forecasts. This implies a total return potential of c.16%. Share price catalyst could come from higher earnings and further cash distributions given its huge cash horde.

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 26/09/13

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