Operating income in 2Q09 declined 16% yoy and 27% qoq to S$93.8m as falling print ad sales affected the profits from the core media business. Net profit declined 13% yoy to $87m and was within our expectations. The Group booked a net investment loss of $32m in 1H09. A lower than expected interim dividend of $0.07/shr was declared (1H08: $0.08/shr).

Print ad revenue declined 19% yoy to S$145.9m due to falling display ad (-16% yoy) and classified ad (-26% yoy) revenues. The visibility of display ad revenue remains low as the lead time for advanced booking stayed at one week. However, the average newsprint charge-out price is following the downtrend in commodity prices and our FY09-10F earnings have been raised by 3% partly due to lower newsprint cost assumption.

Sky@Eleven remains on track for TOP in CY2010. To date, 46% of the project’s revenue has been recognized. According to data from URA, resale units below the average launch price of $960psf represent less than 2% of total units in the project. Retail space at Paragon is fully occupied but office vacancy lowered overall occupancy rate to 98%. Further downward pressure in office and retail rental revenue is expected.

Group investible fund dipped to $0.9b mainly due to the dividend distribution in Dec-08 and a $33.8m net loss from externally managed fund. 80% of the fund is now internally managed, compared to 50% previously. Effectively, the cut in interim divided dampened hopes of bumper dividends for the 25th anniversary this year, but the Group’s policy of paying out the bulk of recurring income remains unchanged. Our FY09F DPS estimate has been revised up to 22.3 cts following our earnings revision.

Our SOTP target price is lowered from $3.25 mainly due to a smaller unrecognized development profit. Driven by out-performance in the recent weeks, the implied valuation of its media business is at its ten-year trough of 11x PER, compared to 8x in early March. Adjusted P/NTA is still below historical low of 2x, even as we assume a 20% drop in revaluation surplus. We maintain Buy, based on yield of 8.0% and potential capital appreciation of 10%.