SPH's earnings forecast for 2013 slashed by 5%

No thanks to slower ad revenue growth.

DBS updated its earnings forecasts for SPH, as its last report was back in April. Its core net profit for FY13/14F are revised down by 5% and 10%, respectively, after imputing for slower ad revenue growth since its last update and taking into account the minority interest in SPH REIT. 

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We have also factored in the fair value gains of S$111m from its investment properties that was reported in its 3Q13 results.

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.

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.