Singapore Press Holdings (SPH) - UOB Kay Hian 2020-05-21: Strategy In Place To Unlock Value

SINGAPORE PRESS HLDGS LTD (SGX:T39)

Singapore Press Holdings (SPH) - Strategy In Place To Unlock Value

SPH continues to adopt its capital recycling approach with the recent divestment of its AXA Tower stake and Buzz chain. Given the trend in place, SPH looks set to further unlock value from its non-core assets.
On the media front, the group has also recently partnered Google in a bid to improve ad spend. Its student accommodation business is receiving healthy bookings and the retail properties in Australia are seeing a recovery in footfall.

Singapore Press Holdings (SPH, SGX:T39) provided an update for its business, given the fluid COVID-19 situation. Management provided insights into some of its latest activities and re-iterated its disciplined capital management and capital recycling strategy.

SPH recently signed a joint business plan with Google. This involves collaboration on digital advertising front, by improving the programmatic ecosystem and expanding advertisers’ budget.
As for subscriptions, both companies will work on reducing churn and experiment with the delivery of news experiences through video and audio content. In addition, there will also be collaboration in the areas of talent and innovation-culture building.

SPH also announced that its purpose-built student accommodation (PBSA) assets had achieved 69% of next Academic Year’s (AY20/21) target revenue as of 11 May (65% as of 20 April 20). Note that universities located in cities with PBSA assets - Edinburgh, Sheffield, Glasgow - are planning to start academic terms in September. Other universities including Oxford, Cambridge, Bristol, Leeds have no plans to change starting dates.
While international student bookings are slow, incoming bookings are expected to accelerate after mid-May as universities are expected to start making unconditional offers to students

SPH has divested a 5.29% stake in AXA Tower for approximately S$33.2m with a small divestment gain. In addition to the divestment of convenience store chain Buzz, we note that the group is continuing to review its non-core businesses and investments as part of its disciplined capital allocation approach.
On that note, we observe that the group had incorporated a new subsidiary Times Genting Pte Ltd, and it owns a sizeable industrial property in Genting Lane, notably with the same namesake. In our view, a consolidation of operations could provide the potential to further unlock value from its assets.

Digital subscription was up 8% in April, with SPH’s News Tablet subscription. According to the group, engagement of readers and readership was also up, with page views tripling y-o-y in Apr 20 while time spent on SPH apps rose 30-40% y-o-y in Apr 20.

Tech giants, such as Google, have over the years accumulated a sizeable share of the digital advertising revenue. Some jurisdictions, such as Australia have recently mandated tech companies to compensate local media to share its advertising revenue. The European Union have also brought in new online copyright rules in 2019. While it is too early to determine the effects of such a move for SPH, we view the partnership as a step to ease regulatory risk for tech companies, and may potentially level the playing field for media companies in the longer term, in light of the dominance from tech firms.
Digital ads still comprise a small proportion, of about 15% in ad revenue for SPH, which the group is aiming to grow to a larger extent in the near term with the collaboration.

The group noted that footfall is recovering in Australia, with the easing of stay-home measures. Many retailers have started reopening since 11 May 20. SPH’s REIT (SPH REIT (SGX:SK6U)) retail properties in Singapore have offered a full rental waiver for Apr and May to eligible non-trading retail and medical tenants. Total rebates average up to 2.3 months.

In the past five months, the group has consistently bought back shares amounting to 4.21m shares, or 0.26% of its share capital, which is a show of confidence in management’s strategy.

Maintain HOLD with a slightly higher SOTP-based target price of S$1.52, given lower share base from share buybacks. See attached PDF report for SOTP valuatoin details.
Entry price is S$1.30. A rerating could arise if the overhang from its property business is eased.
See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
SPH share price catalyst
- Pick-up in retail malls and international students for PBSA.
- Slower-than-expected decline in the media business.

Lucas Teng UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2020-05-21

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