Singapore Press Holdings (SPH) - OCBC Investment 2019-01-15: Lingering UK And SG Property Concerns


Singapore Press Holdings (SPH) - Lingering UK And SG Property Concerns

  • No big 1QFY19 surprises.
  • Property portfolio not without concerns.
  • Fair Value of S$2.55

In-line scorecard

  • SINGAPORE PRESS HLDGS LTD (SGX:T39)’s 1QFY19 results held little surprises. Operating revenue dropped 1.7% y-o-y, on the back of a 6.8% y-o-y decline in media contribution.
  • While classified print ad revenue continued to clock a sharp 17.1% y-o-y decline, display print ad revenue saw a modest 2.7% y-o-y drop, though we refrain from reading too much into this.
  • SPH clocked 11.1% y-o-y revenue growth in its property segment. If we were to exclude the S$6.3m contribution from its UK student accommodation portfolio, revenue growth for the quarter would have been flattish.
  • Core PATMI grew 1.5% y-o-y to S$57.9m, after accounting for 1QFY18’s gain arising from the dilution of interest in MINDCHAMPS PRESCHOOL LIMITED (SGX:CNE), retrenchment costs, and gain on disposal of investments.
  • With 1QFY19’s core PATMI comprising ~26.2% of our full-year forecast, we deem this set of results to be broadly within our expectations.

Still some concerns over property portfolio

  • SPH’s Woodleigh Residences achieved an overall price psf of over S$2k during its soft launch with a 55% sell-through rate. With the 2nd phase estimated to be launched in 3QFY19, we expect a bumper crop of new private home launches in 1H19 to provide some level of competition.
  • Moving forward, we believe that it is highly likely for the group to continue to bulk up on its UK student accommodation portfolio, pursuing assets associated with the Russell Group that give a ~6% cap rate.
  • We note that the UK government has outlined in their Dec’18 white paper that there will continue to be no limit on the number of international students who can study in the UK, and will also offer 6 months’ post-study leave to all master’s students, and bachelor’s students studying at institutions with degree awarding powers. Despite policy efforts, we believe that concerns will still linger, as demonstrated by the recent open letter sent to all MPs on behalf of the heads of 150 UK universities. In particular, concerns were raised about the uncertainty created by Brexit, such as in research links, exchange of students, and research funding sources.
  • We maintain our forecasts and fair value estimate of S$2.55 for now.

Joseph Ng OCBC Investment Research | https://www.iocbc.com/ 2019-01-15
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.550 SAME 2.550