Singapore Press Holdings (SPH) - CGS-CIMB Research 2020-05-13: Going Online


Singapore Press Holdings (SPH) - Going Online

  • Apr subscription numbers point to an accelerated shift to digital for SPH, but advertising demand could remain weak in the near-term on macro concerns.
  • Easing lockdown measures and c.S$46m government support could provide some relief to its local and overseas property operations.
  • Reiterate HOLD; sustained traction in its digital strategy could re-rate the stock.

Gaining more digital subscribers

  • Thanks to Covid-19 and circuit breaker measures, SPH (SGX:T39) saw higher new digital subscription numbers across its news publications in Apr, including The Straits Times (40% m-o-m), The Business Times (+100% m-o-m) and Lianhe Zaobao (+138% m-o-m), even as virus-related articles across its digital platforms were also made accessible to non-subscribers.
  • Visitors and page views on its news sites and apps also grew significantly, while 65% of its print subscribers are also reading newspapers more frequently vs. three months ago, according to its recent online studies. We think these would benefit SPH’s circulation revenue and reduce newsprint costs, possibly mitigating weaker advertising demand in the near-term.

More rental relief and government support

  • In early May, SPH REIT (SGX:SK6U) (its 66%-owned subsidiary) announced it will be granting a total of 2.3 months of rental relief (on average) and pass on property tax rebates to its tenants, which have been factored into our FY20F forecasts. This could be slightly offset by an estimated S$46m support from the government’s extended budget measures, the bulk of which comes from jobs support scheme.

Non-core divestments; UK PBSA could see some recovery

  • SPH recently sold its 5.29% stake in AXA Tower for S$33.2m, of which S$5.9m will be reinvested for an effective 1% interest to partake in the building’s redevelopment; the minority stake was previously bought in 2015 for S$19.3m. This follows the group’s earlier divestment of its chain of 50 franchise convenience stores in Singapore, and is part of its overall strategy to recycle capital and exit non-core businesses.
  • Meanwhile, rental refunds for its PBSA of £4.5m were at the lower end of its initial guidance with 20% in the form of credits. As of 20 Apr, 65% of its purpose-built student accommodation (PBSA) target revenue for the upcoming academic year has been achieved and could see further recovery from the easing UK lockdown.

Reiterate HOLD

  • We keep our HOLD with an SOP-based Target Price of S$1.57. SPH continues to have sufficient access to capital (with additional drawdown of S$325m in Apr resulting in net gearing of 50.8% as of end Mar) and no near-term refinancing needs.
  • We see more attractive valuation closer to S$1.40, which is pegged to 1 s.d. below historical mean of 14x P/E.
  • See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
  • Upside risks are sustained expansion of digital subscriber base and faster easing of lockdown.
  • Downside risks: macro uncertainty and unexpected dividend cuts.

NGOH Yi Sin CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-13
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.570 SAME 1.570