SINGAPORE PRESS HLDGS LTD (SGX:T39)
Singapore Press Holdings - Bracing For The Long Run
- Although 2Q20 earnings were flat, expect a weaker 2H20. SPH (SGX:T39) has prepared for business impact from Covid-19 lasting up to 18 months, cutting dividends and putting all M&As on hold to conserve cash. The group’s recent S$500mn 3.2% coupon bond issued in January 2020 was timely, raising the cash pile to c.S$502mn and providing a stronger Cash/Short Term Borrowings buffer of 0.79x to tide through the period.
- We view SPH as Neutral given its large cash pile, low levels of short term debt and manageable gearing levels, but this will be offset by the negative impact of Covid-19 on the business. The group has low funding requirements in the short term.
2Q20 results were flat.
- SPH's 2Q20 revenues increased c.1.8% y-o-y to S$227.5mn on higher revenues (c.+33%) from the Property segment, offset by a decline in advertisement and circulation revenue of S$17.5mn (c.-18.3%) and S$2.2mn (c.-6.5%) respectively.
- Operating profits increased c.5% y-o-y to S$46.5mn on higher EBIT margins at c.28.9% (vs 2Q19’s c.26.3%) mainly due to the exclusion of land rent from FRS116 adoption. OCF was a negative S$43.2mn from higher working capital.
- Interim dividend was cut by c.73% y-o-y to 1.5 cents to conserve cash. See SPH Dividend History.
Expect a weaker 2H20 impacted by Covid-19.
- Media segment outlook is poor, with recession fears exacerbating the already declining advertising revenues, while the property segment (retail malls and purpose-built student accommodation (PBSA)) suffers from stay-home measures. These challenges will be partially offset by c.S$30mn if wage support from the recent Budget.
- SPH REIT (SGX:SK6U), however, of which the group owns 70%, will be fully passing on all property tax rebates given by the Inland Revenue Authority of Singapore to its tenants.
Interest coverage lower from higher interest expenses.
- SPH's EBITDA interest coverage fell c.18.3% y-o-y to 4.58x as interest expenses rose by c.+38.7% to S$17mn, mainly due to interest costs on the S$500mn 3.2% coupon MTN issued in January 2020 and loan facilities taken up to fund the acquisition of new assets in the PBSA portfolio and Westfield Marion.
- SPH has S$450mn in outstanding perpetuals. Assuming it pays out S$18.75mn in distributions p.a, S$4.7mn per quarter and taking 50% of this as interest, we find EBITDA/(Interest plus 50% perpetual distribution) at 3.59x.
Low near-term financing needs.
- As at 29 February 2020, SPH faced S$621.5mn in short term debt, representing c.21% of total debt. This short term debt is largely covered by the group’s cash pile of c.S$502mn, representing Cash/Short Term Borrowings of c.0.79x.
- We find gearing (D/A) at c.35.8% and net gearing at c.29.9% still manageable should SPH require refinancing, while the group maintains it has considerable access to unused credit lines.
- See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
Timothy Ang
Phillip Securities Research
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2020-04-15
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