Slightly  below  our  expectations;  4QFY12  recurring  earnings  fell  17%  YoY. 4QFY12  recurring  earnings  of  S$86m  (-23%  QoQ)  came  in  slightly  under  our expectations  due  to  lower  than  expected  N&M  advertisement  revenue.  FY12 recurring  earnings  were  up  a  marginal  0.3%  to  S$410m. We  lowered  our  FY13 PATMI by 7% due to lower advert revenue and higher operating expenses. SPH has declared a final dividend of 17S'' a share bringing total dividends for FY12 to 24S''  a  share.  Going  forward  we  believe  SPH's  cash  flow  is  strong  enough  to sustain a dividend payout of 24S'' per annum, implying a yield of 5.9%. Maintain NEUTRAL  with  slightly  higher  SOTP  TP  of  S$3.95  (from  S$3.85  previously)  as we  roll  forward  our  valuations  to  FY13.  We  think  SPH's  FY13  dividend  yield  of 5.9% remains attractive and will cushion any downside in share price, though we see a lack of near term catalysts to drive upside for its core publishing business.

Property segment offset decline in N&M. Property rental income grew 14% in FY12  to  S$191m  due  to  a  101%  growth  in  rental  income  from  Clementi  Mall  to S$37m  (on  the  back  of  a  full  year's  operations),  as  well  as  a  3%  increase  in Paragon's  rental  income  to  S$154m  (due  to  higher  rental  rates).  This  helped offset  weaker  Newspaper  and  Magazine  revenue  which  declined  1%  due  to weakness  from  both  print  adverts  as  well  as  circulation  revenue.  The  Seletar Mall, SPH's latest property project is expected to be completed by end 2014.
 
Slowdown  in  Newsprint charge-out  rate could bring some cheer.  Newsprint charge  out  rates  averaged  US$678/MT  in  FY12  and  US$654/MT  in  4QFY12. SPH will benefit from current lower rates which are hovering at ~US$600/MT. As such, we have lowered our FY13 charge out rate assumptions by 10%.

SOTP-derived  TP  of  S$3.95. We  value  the  core  media  segment  based  on  11x FY13 P/E, Paragon (S$2.5b) with assumption of a 5% revaluation gain, Clementi Mall (S$266m) with assumption of average passing rent of S$15/sqft, cap rate of 5.5%, M1 and Starhub at DMG TP and investments as at Aug 12.

Source: OSK