Singapore Press Holdings (SPH) - CGS-CIMB Research 2020-07-14: COVID-19 Steals The Headlines


Singapore Press Holdings (SPH) - COVID-19 Steals The Headlines

  • SPH's 3QFY8/20 print ad revenue (-51% y-o-y) missed our/consensus expectations; we understand media remains profitable largely due to sizeable JSS support.
  • We cut our FY20-22F EPS and DPS to reflect accelerated media decline, weaker rent, lower student enrolment and payout.
  • Maintain HOLD on decent yield but limited catalysts and earnings visibility.

SPH's 3QFY20 operational updates

  • SPH (SGX:T39) issued profit guidance for FY20F operating profit to be significantly lower than FY19’s S$187m (1HFY20: S$103m). In its 3QFY20 operational updates, earnings visibility remains limited in two of its main business segments (media and retail property), while the refunds for its UK purpose-built student accommodation (UK PBSA) came in at £4.6m, the lower end of its previous guidance.
  • The group also thinks there is risk of a negative revaluation of its investment properties come 4QFY20F, particularly for its assets in Australia, Singapore and UK; this could be partially mitigated by the c.S$39m gain from earlier divestment of AXA Tower and the land for data centre development.

Print ad revenue fell by 51% y-o-y in 3QFY20

  • SPH saw its worst-ever drop in print ad revenue in 3QFY20 (9MFY20: -30.4%), with display and classifieds down 55.8% and 42.7% y-o-y respectively. Advertising has marginally picked up on reopening and Phase 2 in 4QFY20F, while the improvement in total circulation numbers was unable to offset the decline in print ads.
  • Thanks to the government’s job support scheme (c.S$46m to contribute over FY20-21F), we understand that its media business was profitable in 3Q despite the revenue headwinds.

Retail footfall below pre-virus levels; UK PBSA at 75% revenue target

  • SPH’s retail malls received lower rental income in 3QFY20 as rental relief was offered to its tenants; visitor traffic fell 30-60% across its malls (except Figtree Grove) during the Mar-May period and has since posted a gradual recovery.
  • While the student admission exercise has been deferred by Covid-19, UK universities have confirmed opening with minimal/no delay and SPH has achieved 75% of its target revenue for AY20/21 (previously 69%).
  • SPH's aged care business remains stable with higher average bill size and bed occupancy ratio at Orange Valley, and 2 more asset acquisitions (161 beds) to be completed in Japan.

Reiterate HOLD with 4.0-6.3% dividend yield

  • We slash our SPH's FY20-22F EPS by 13.1-22.8% to account for the accelerated media revenue decline, and slower-than-expected recovery in retail malls.
  • Our SOP-based Target Price hence falls to S$1.35, now pegged to a wider group discount on potential fair value loss. This also led to our FY20-22F DPS cuts, which are primarily funded by dividends from SPH REIT (SGX:SK6U) and divestment gains.
  • Maintain HOLD as we see limited earnings visibility and catalysts in the near term, supported by its dividend yields of 4.0-6.3%.
  • See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
  • Upside/downside risks: Covid-19 containment/resurgence.
  • SPH had S$810m cash and 4.2x interest coverage ratio as at end-May 2020.

NGOH Yi Sin CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-14
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.35 DOWN 1.570