Singapore Press Holdings (SPH) - CGS-CIMB Research 2019-07-15: Pressed For More


Singapore Press Holdings (SPH) - Pressed For More

  • Singapore Press Holdings (SPH)'s 3Q19 earnings miss (-44.1% y-o-y) stems from weaker media profitability, one-off professional fees and impairment, as well as lower investment income.
  • Economic uncertainty weighs on advertising spend, while aged care segment faces more competition and near-term gestation losses.
  • Property acquisitions to grow recurring income and support 4-5% dividend yield.

SPH's 3Q19 core PATMI -29% y-o-y, missing our/consensus expectations

  • Singapore Press Holdings (SPH, SGX:T39) reported a 3QFY19 PATMI of S$26.2m, which fell 44.1% y-o-y on the back of higher premises costs (from the acquisition of purpose-built student accommodation [PBSA] and Figtree assets), other operating expenses (c.S$3m professional fees from M1 transaction and PBSA), and lower investment income (absence of divestment gains and dividend income).
  • Excluding a S$22.8m impairment largely on its aged care business, 3Q19 core PATMI would have been S$49.0m, which is -29.2% y-o-y and below our/consensus full-year numbers.

Media, aged face strong

  • Media a pretty sight in 3Q19, with across display, classified and ads. The rate of accelerated to 21.0% (2Q19: -13.8%, 3Q18: -8.0%), as advertisers turned economic outlook and cut. 3Q19 media also to 7.6% (9M19: 11.9%, 9M18: 17.9%) as the lost its operating leverage and to invest in digital.
  • Despite improvements in average bill size and bed occupancy of Orange Valley (OV), SPH made a S$21.5m impairment amid rising competition from upcoming increase in build-own-lease (BOL) nursing home bed capacity, which affected Orange Valley’s growth projections. Orange Valley remains net loss-making (but EBITDA positive) in 3Q19.

Property still only

  • The segment, which for 80% of SPH’s 9M19 overall profitability, grew its y-o-y, thanks to a S$14.3m contribution from UK of Figtree and a Chinatown Point. About 17% Woodleigh Residences had been ASP above S$1 psf as of end.
  • SPH has also committed to a 6.8% stake in KBS PRIME US REIT (SGX:OXMU) (c.7.4% dividend yield) which should further build its recurring property income stream. The recent issuance of S$150m perp securities (4.5%) would allow the group to pursue more asset management opportunities overseas.

Lower FY19-21F EPS by 17.3-26.4% and TP

  • We cut our FY19-21F EPS by 17.3-26.4% to reflect:
    1. steeper media topline decline and lower margin,
    2. higher property income,
    3. impairment charges, and
    4. perps dividends.
    Our SOP-based Target Price hence falls to S$2.22; maintain HOLD with a 4-5% dividend yield.
  • Downside risks: deteriorating media environment and poor M&As.
  • Faster growth in PBSA could be a re-rating catalyst.

NGOH Yi Sin CGS-CIMB Research | https://research.itradecimb.com/ 2019-07-15
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.22 DOWN 2.640