Singapore Press Holdings (SPH) - OCBC Investment 2019-10-21: Pressing On


Singapore Press Holdings (SPH) - Pressing On

  • Trimming headcount across Media.
  • Still focused on PBSA.
  • Fair Value of S$2.28.

SPH Investment Thesis

  • SINGAPORE PRESS HOLDINGS (SPH, SGX:T39) has made some strides in its digital push and income diversification strategy, as shown by its latest acquisition of UK student accommodation assets, but its Singapore residential property exposure in Bidadari still remains a source of potential headwind, while its media business in FY19 was a drag on results.
  • A weak macro backdrop is likely to continue to weigh on advertisement revenue moving forward.
  • See SPH Share Price; SPH Target Price; SPH Analyst Reports.

Under expectations

  • SPH’s FY19 results came inbelow our expectations. The group’s operating revenue was down 2.4% y-o-y to S$959.3m, bolstered by revenue contribution from its Purpose-Built Student Accommodation (PBSA) portfolio, SPH REIT (SGX:SK6U)’s Figtree Grove and Rail Mall, which helped to offset declines in its media revenue.
  • The group’s newspaper ad revenue y-o-y decline has increased from 12.4% in FY18 to 13.9% in FY19, owing to notable weakness in the Classified segment. PATMI wasdown 23.4% y-o-y to S$213.2m, due largely to the lack of investment income, following the previous divestment of the group’s Treasury & Investment portfolio.
  • Adjusting for exceptional and one-off items, core PATMI came in at S$155.2m, comprising 96.5% of our full-year forecast.
  • SPH has declared a final and special DPS of 5.5 S-cents and 1S-cents, bringing the full-year DPS to 12 S-cents. See SPH Dividend History.

Relying on property moving forward

  • SPH has also announced that it will be looking to streamline its media sales capabilities, with around 5% reduction in staff numbers across the Media Group. See SPH Announcements; SPH Latest News.
  • We expect modest net cost savings in FY20, given that the group will be incurring ~S$8m in retrenchment cost in1QFY20.
  • Moving forward, we believe the group will continue to be on the lookout for more PBSA assets,building on its portfolio AUM of more than S$600m, though we note that cap rates for such assets in the UK have been compressing.
  • SPH has also partnered a Japanese asset manager to set up a fund focusing on aged care and healthcare assets in Japan; SPH will be contributing up to S$50m in seed equity.
  • Separately, we note that Woodleigh Residences is 20% sold as at 31 Aug, with an ASP of ~S$1.9k psf.
  • In our view, SPH’s media business outlook remains challenging, and we believe it is still too early to call the bottom on this segment.
  • We roll forward our valuations and reduce our Fair Value slightly from S$2.29 to S$2.28.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-10-21
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.28 DOWN 2.29