SPH - DBS Research 2016-01-28: Negatives priced in

SPH - DBS Vickers Research 2016-01-28: Negatives priced in SPH SINGAPORE PRESS HLDGS LTD T39.SI 

Singapore Press Holdings - Negatives priced in 


Upgrade to HOLD, share price reflecting negatives. 

  • We upgrade SPH from FULLY VALUED to HOLD as we now believe the current share price has priced in negatives. 
  • We have previously downgraded the stock on sluggish print ad growth outlook on the back of slower GDP growth, leading to cuts in DPS. Since our downgrade, share price has declined by c.9%. 
  • We believe these negatives are now largely reflected in the current share price. 

Monetisation of M1 could support dividends. 

  • Keppel Corp’s review of non-core assets such as M1 could lead to monetization of SPH’s stake as a potential scenario, in our view. 
  • SPH’s 13% stake in M1 is currently worth c.S$280m (S$0.175/share) based on market value. While this could lead to an immediate drop in dividend income for SPH, the cash inflow from divestment could support DPS payment, lending support to the share price. 


Outlook: 


Less risks of dividend cut and low dividend yield. 

  • Our earlier negative stance on the stock apart from lower adex spend was also hinged on lower earnings and potential DPS cuts in FY16F. 
  • However, as dividend yield is now at 5.4% and with possibility of higher DPS if SPH sells M1 shares, we now see limited downside for the stock. 


Valuation: 


TP of S$3.51 based on sum-of-parts. 

  • Our target price of S$3.51 is based on sum-of-parts valuation. 
  • We value SPH's core newspaper and magazine operations at S$1.43/share based on discounted cash flow model. 
  • SPH’s 70% stake in SPH REIT is valued based on our target price of S$0.99. 
  • These two parts are added to the estimated value of Seletar Mall, net cash and investments, to derive our TP. 


Key Risks to Our View: 


Potential dividend cut 

  • Our view is premised on higher dividend yield and potential of higher DPS from the M1 divestment, which will limit the share price’s downside. 
  • A dividend cut could well materialise if the economy continues to weaken and the value of M1 shares is not unlocked.



Alfie Yeo DBS Vickers | Andy Sim DBS Vickers | http://www.dbsvickers.com/ 2016-01-28
DBS Vickers SGX Stock Analyst Report HOLD Upgrade FULLY VALUED 3.51 Same 3.51


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