Maintain neutral stance towards SPH

According to latest data from The Nielsen Company ("Nielsen"), Singapore advertising expenditures (adex) in July 09 fell 6.8% YoY to S$168.2m, representing the highest monthly adex year-to-date. Radio, Cinema and Internet adex showed YoY improvements and in particular, the July Internet adex grew a record 54.9% YoY (albeit from a low base). But performance across all other adex platforms continued to be weak, with Bus & Taxi adex registering the largest YoY decline (-24% YoY). Newspaper adex (excluding Today) decline decelerated to 8.7% YoY, but newspaper's (excluding Today) 32.9% share of total adex was only marginally above June 09's three-year low. Total print (newspaper and magazine) adex in July reached S$74.5m, 7% lower than a year ago.

Although adex decline appears to be decelerating, it is difficult to get too excited about the July 09 adex data. Our channel checks reveal that advertisers remain generally cautious. And although sentiment is strengthening, this has not translated into an increase in advertising orders and marketing budgets remain restrained. As we have previously highlighted, there is a typical lead-time for planning of and adjustments to marketing budgets and as such, we continue to expect any substantial adex recovery to happen towards mid-2010.

We estimate SPH booked approximately S$109m advertising revenues in the first two months of 4Q09, in-line with our estimates for the quarter (S $166m). Given lack of evidence of any strong recovery in the adex market, we maintain our forecasts and Hold recommendation.

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