Singapore Press Holdings - Phillip Securities 2020-04-15: Bracing For The Long Run


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.

Timothy Ang Phillip Securities Research | https://www.stocksbnb.com/ 2020-04-15
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998