Singapore Press Holdings (SPH) - UOB Kay Hian 2020-07-15: Cash Conservation For Now.


Singapore Press Holdings (SPH) - Cash Conservation For Now.

  • SPH announced 3QFY20 updates that underscored the severe and uncertain effects of COVID-19 on its business units, including expectations of a negative revaluation outcome for its investment properties. Media ad revenue declined to a large extent, - 51% y-o-y in 3QFY20, though student accommodation assets continued to fare better in bookings for the new academic year.
  • The near-term outlook appears uncertain. Maintain HOLD with a lower SOTP-based target price of S$1.41.
  • Recommended entry price: S$1.20.

SPH's 3QFY20 operational updates.

  • Singapore Press Holdings (SPH, SGX:T39) provided operational updates for 3QFY20. No financials were released but the group expects significantly lower profits for FY20. Revaluation of investment properties at the end of FY20 is also expected to be negatively impacted by COVID-19. See SPH Announcements.

Sizeable impact on media segment.

  • Total print ad revenue declined 51% y-o-y in 3QFY20, with revenue from display ads down 55.8% y-o-y and that for classifieds down 42.7% y-o-y.
  • Digital subscriptions have increased, with overall circulation up 9.5% y-o-y. Ad revenue has been substantially affected with cut backs to advertising spending.

Retail segment yet to find its footing.

  • Rental reliefs were enacted to help retail tenants tide through the impact of COVID-19. Visitor traffic was muted in the quarter as expected; Footfall at Paragon was down 60% y-o-y while Clementi mall was down 52% y-o-y. Australian mall, Westfield Marion, was down 38% y-o-y.
  • While the Phase 2 re-opening is a positive, there are still uncertainties with the recovery, given safe distancing measures implemented in the malls (serving a smaller number of patrons).

Student accommodation faring better.

  • SPH achieved 75% of its target revenue for the next academic year as at 10 Jul 20, up from 69% as of 19 May 20. Bookings improved with more certainty on the start dates of universities, admission processes as well as government support.
  • SPH is looking to attain a higher proportion of target revenue in the following weeks till the start of academic year between Sep-Oct 20. Local student enrolments remain healthy, though uncertainties remain with international students.

JV to develop and operate data-centre facilities.

  • SPH also recently announced the development and operation of data-centre facilities in its Genting Lane property, under a JV with Keppel Corp subsidiaries. SPH will hold a 40% stake in the JV, with an effective 60% interest in the property being disposed of. The gain from disposal of the property amounts to S$25.5m while SPH will contribute up to a maximum of S$139.6m in investment extended over the property’s development period.

Continuation of strategy to build recurring income.

  • The proposed data centre transaction aims to build upon the group’s asset base, optimising non-core existing assets to yield stable, recurring income. Its JV partner is a seasoned player in the industry with an operational track record of data centre development.
  • SPH anticipates a strong secular trend in the data centre space with increased digitalisation and strong demand for hyperscale data centres. The group continues to gradually supplement its defensive asset base as with its acquisition of student accommodation assets and aged care investments in recent years.

Not out of the woods yet for media segment

  • While the Phase 2 reopening aided the retail ads segment, the pick-up is still tepid. SPH noted the global industry trend of a decline in advertising, including digital advertising budgets. The rate of decline in ad revenue for the quarter came in larger than expected.

Revaluation losses a potential near-term headwind.

  • SPH noted the uncertain and harsh impact from COVID-19 and hence the priority to conserve cash in such an environment. Cash balance currently amounts to a healthy level of S$810m. We opine that any reduction in valuation to the group’s properties is likely to hit its retail segment to a larger extent compared to its student accommodation assets.
  • According to Unite Students, UK’s largest manager of purpose-built student accommodation, the valuation of its UK student accommodation funds was lower by 2.2% hoh for 1H20 while its London Joint Venture fund was lower by 1.5% hoh in 1H20.


  • Reduce SPH's FY20-22 earnings forecasts by 7-9%. We have penciled in a higher rate of decline for media ad revenue and have assumed a 35% y-o-y structural decline for ad revenue in FY20.
  • Maintain HOLD with a lower SOTP-based target price of S$1.41. See PDF report attached below for the SOTP details. Conservatively, we assume a 5% discount for the group’s property segment for now, in light of the challenges arising from the COVID-19 pandemic.
  • Recommended entry price is S$1.20.
  • 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 footfall for retail malls and international students booking for student accommodation assets.
    • Slower-than-expected decline in the media business.
    • Unlocking of value from capital recycling.

Lucas Teng UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2020-07-15
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.41 DOWN 1.520