Singapore Press Holdings (SPH) - OCBC Investment 2019-04-11: Soft 2QFY19 Print


Singapore Press Holdings (SPH) - Soft 2QFY19 Print

  • Media a drag.
  • Bulking up in the UK.
  • Fair Value of S$2.55.

Below expectations

  • SINGAPORE PRESS HOLDINGS (SPH, SGX:T39)’s 2QFY19 results came in below our expectations. Operating revenue fell 4.4% y-o-y, due mainly to a 16% drop in print advertisement revenue and a 8.8% y-o-y fall in circulation revenue, offset however by rental revenue of S$6.2m from the UK student accommodation portfolio and S$3.2m from Figtree Grove Shopping Centre in Australia. These assets also contributed to a rise of 16.8% and 35.5% y-o-y in premises costs and finance costs, respectively.
  • As we understand, the drag in SPH’s media business was partly due to the shorter festive advertising window between Christmas and Chinese New Year this year.
  • Accounting for one-offs, core PATMI came in at S$29.7m, comprising 13.4% of our full-year forecast (2QFY18: 18.6% of FY18 core PATMI).
  • SPH has declared a lower interim 1HFY19 DPS of 5.5 S-cents (1HFY18: 6.0 S-cents).

Making further inroads into the PBSA scene

  • The group has concluded two transactions in Feb-Mar’19 (St Marks and Clifton & Stewart House), which will contribute 380 beds to its UK purpose-built student accommodation (PBSA) portfolio. Contribution from these assets should only be largely seen from 3QFY19 onwards.
  • We understand from management that the cap rate of these assets should be similar to that of the group’s existing UK PBSA portfolio, which has a cap rate of approximately 6%. Management notes that similar cap rates are still seen in cities outside London, and believes that cap rate compression in this sector might not occur so soon, given that Brexit is still playing out.

Fair Value of S$2.55

  • On M1 (SGX:B2F), we get the sense that capital commitments could likely go towards its involvement in a shared 5G network by the incumbents, as envisaged by management.
  • Apart from the UK PBSA segment that the group has been bulking up on, we note that SPH is looking to explore moving into the aged care business abroad.
  • At this juncture, we see limited near-term re-rating catalysts on the horizon. We maintain our HOLD rating and Fair Value estimate of S$2.55 for now.

Joseph Ng OCBC Investment Research | https://www.iocbc.com/ 2019-04-11
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.550 SAME 2.550