Singapore Press Holdings (SPH) - UOB Kay Hian 2019-04-11: Takeaways From 2QFY19 Results Briefing

SINGAPORE PRESS HLDGS LTD (SGX:T39) | SGinvestors.io SINGAPORE PRESS HLDGS LTD (SGX:T39)

Singapore Press Holdings (SPH) - Takeaways From 2QFY19 Results Briefing

  • SPH provided an update on its recent purpose-built student accommodation (PBSA) acquisitions which have high occupancy rates and robust demand. Inorganic expansion seems to be gaining momentum as the group works towards building up a defensive portfolio with strong recurring income.
  • Maintain BUY and SOTP-based target price of $2.82.



WHAT’S NEW


Update on new PBSA acquisitions; good locations with robust demand.

  • SINGAPORE PRESS HOLDINGS (SPH, SGX:T39) provided more information on its purpose-built student accommodation (PBSA) acquisitions in Feb and Mar 19. Both properties were off-market projects with cap rates close to 6%, while we note that its initial Mayflower portfolio had a net yield of about 6.3%.
  • St Marks is in the city of Lincoln, with close proximity to the University of Lincoln, with management noting a strong demand of up to 80% of beds filled for the next academic year. According to the Higher Education Statistics Agency (HESA), enrolment for the university grew at a 3-year CAGR (2015-18) of 11.1%.
  • The second acquisition, Clifton & Stewart House, in the city of Glasgow, features a strong student-to-bed ratio, a testament to robust demand. According to HESA, enrolment for the University of Glasgow grew at a 3-year CAGR (2015-18) of 9.0%.

Expansion on the agenda to generate stronger recurring income.

  • Management reiterated its preference for the PBSA segment for its defensiveness as well as the strong branding of UK universities to continue attracting students. While the initial portfolio provides SPH the foundation, further additions to the portfolio will aid in scaling the business.
  • SPH is also identifying local and overseas expansion in its aged care business as well as other defensive yielding assets.

Drop in print revenue continues; still looking to ease the decline.

  • Media revenue dropped 13.8 y-o-y, with the decline in the Classifieds segment particularly severe (-23% y-o-y).
  • Management noted the difficulty of the print medium in this respect and is looking towards alternatives on the internet to help ease the decline, such as SGCarMart and SRX for the automobile and property sectors respectively.

Woodleigh Residences set for official launch.

  • Woodleigh Residences is slated to be officially launched at end-May 19, with its accompanying retail concept to be launched soon.
  • Management remains positive on the selling prices of its residential units at about S$2,000psf, similar to competing developments.

Efforts towards digital.

  • SPH recently launched a news tablet subscription via Samsung tablets, with pre-loaded e-paper version of Chinese newspapers. This seeks to target the older generation of customers.
  • SPH is also set to have a closer collaboration with M1 (SGX:B2F) to seek synergies post completion of its general offer, tapping on its large customer base and developments in the 5G space.

Investing now to reap a more sustainable dividend.

  • The proposed lower interim dividend is in line with a smaller base of earnings, while we also note the payout ratio to core earnings has only dipped slightly. We see dividends would stabilise going forward when the property segment forms a larger part of group earnings.


STOCK IMPACT


Marginal contribution from PBSA for now; looking towards further addition to portfolio.

  • The two new assets are still comparatively small and we look to further significant contribution from the PBSA portfolio.


EARNINGS REVISION/RISK

  • None.


VALUATION/RECOMMENDATION


Maintain BUY and SOTP target price of S$2.82.

  • We remain positive on the group’s transitional strategy into a defensive portfolio, which is largely under-appreciated.


SHARE PRICE CATALYST

  • Acquisition of student accommodation assets.





Lucas Teng UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2019-04-11
SGX Stock Analyst Report BUY MAINTAIN BUY 2.820 SAME 2.820



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