Resilient in carnage. Singapore Press Holdings (SPH) has weatheredthe current financial storm in a better fashion than most of its STI peers.While the STI plunged 36.4% in Oct-Nov, SPH demonstrated resilience byfalling only 13.5%, thus outperforming the STI by a credible 22.9%.

Growth looking more elusive. With Singapore falling into the deeperrecesses of economic difficulties, we are expecting SPH to suffer in tandemas advert and classified revenues fall while costs edge upwards as it hasto push through its new media development strategy. As a recap, SPHdelivered 12.3% YoY topline growth to S$1.316b but PATMI still fell 12.4%YoY to S$437.4m. The topline was helped by a stronger recognition of theSky@Eleven project while the poorer bottomline was due to less investmentincome and impairment charges.

Lowering expectations. In view of the challenging year ahead, we havelowered our estimates for its core printing business by 4%. While weunderstand that Paragon is a jewel in Orchard Road, we still lower ourupward rental revisions for renewals to a similar level to FY08 to cater tothe mounting difficulties faced by luxury goods retailers. We also anticipatea 10% cut in valuation for Paragon in its next exercise in Jun 09. The onlyforeseeable upside is SPH's higher recognition from its Sky@Eleven projectfor FY09.

Cash preservation mode. We specifically mentioned in our 13 Oct 08report that while SPH has stepped up its dividend/share to S$0.27 forFY08, we feel that management sent a clear signal when it iterated that itdoes not have a dividend policy. With our latest earnings revisions, our lastestimate of S$0.24/share is further cut to S$0.215/share. Our reason forthe dividend cut is not based on the buyer default rates of the Sky@Elevenproject but more a function of free cash flow. While SPH continues torecognize revenue via progressive construction stages, there is marginalreal cash flow into the company. We expect TOP in 3Q2010 which impliesthat buyers have till then to obtain appropriate financing. Despite the cut,FY09 still gives a dividend yield of 6.1%.

Maintain BUY but lower valuation. While we have reduced our fair valueto S$4.86 (prev. S$5.14) based on our SOTP valuation, we expect SPH tocontinue its outperformance in this down market. Maintain BUY.