Singapore Press Holdings (SPH) - UOB Kay Hian 2020-08-24: Awaiting Signs Of Relief


Singapore Press Holdings (SPH) - Awaiting Signs Of Relief

  • SPH announced the restructuring of its media sales and magazine operations, further streamlining its media segment. The group still noted the significant impact on its advertising revenue. Student accommodation assets are into their final bookings for the coming academic year and will need to see local students filling up its remaining available beds.
  • Maintain HOLD with a lower SOTP target price of S$1.22.
  • Entry price: S$1.00.

SPH - Restructuring media segment.

  • Singapore Press Holdings (SPH, SGX:T39) recently provided operational updates, including the restructuring of its media sales and magazine operations. This impacted about 140 staff from the Media Solutions Division (MSD) and SPH Magazines, about 5% of the overall media headcount, and incurred retrenchment costs of S$8m which will be recognised in 4QFY20.

Still hard hit on the advertising front.

  • SPH noted that the economic downturn has severely impacted advertising revenue. While there has been some recovery post circuit breaker, which we noted consists of certain retail ads, overall advertising revenue is still significantly down. Digital circulation remains the only bright spot, up 53% y-o-y ytd. The group has also ceased magazine publications of Cleo, Young Parents and Shape.

Developmental property update.

  • SPH highlighted that Woodleigh Residences sales have been encouraging since the circuit breaker. Total units sold as at 16 Aug 20 were 288 units (43% of total units) with an average ASP of S$1,892psf. Selling prices have not dipped to a large extent despite the pandemic.

Crunch time for PBSA.

  • SPH noted slight disruption to its purposed built student accommodation (PBSA) assets under development, which comprises Student Castle (Brighton, 206 beds) and Student Castle (at Oxford, 515 bed). The group also has income support arrangement for its developmental assets, and we opine that the delay to the developmental student accommodation assets is not a large concern.
  • Currently, the group had achieved 83% of target revenue for the coming academic year as of 14 Aug 20 (10 Jul 20: 75%). The following weeks will see peak bookings with the release of A-level results in the UK on 13 Aug 20. Local students will largely account for the remaining bookings and we expect the group to reach 90% of target revenue for the coming academic year.

Assessing potential revaluation losses.

  • Assessing peers, we note that Starhill Global REIT (SGX:P40U)’s Wisma Atria and Ngee Ann City property recorded revaluation losses of 0.7% and 4.6% y-o-y respectively as of Jun 20, while Unite Students, UK’s largest manager of PBSA, recorded lower valuations of 1.5-2.2% h-o-h for 1H20. Using a 2-4% discount range on SPH’s share of investment properties of S$3.7b, this works out to an estimated range of S$75m-150m in revaluation losses.
  • See SPH’s SOTP-valuation details in PDF report attached below.

Financial profile stable.

  • SPH had gross cash of S$866m, with interest coverage of 4x as of Jul 20.

SPH - Valuation & Recommendation

  • We trim SPH's FY21-22 net profit forecasts by 2-3%. We account for the one-off retrenchment costs in FY20 and lower headcount in FY21-22, offset by the continual weakness in the media segment.
  • Maintain HOLD on SPH with a lower SOTP-based target price of S$1.22. We input a higher conglomerate discount of 25% (previously 10%), given the severe adverse impact of the pandemic across all business segments for the group.
  • See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
  • Current valuation appears undemanding at 0.5x book value although COVID-19 is expected to affect the valuation of SPH’s investment properties. See P/B chart in PDF report attached below. We opine that a better outlook for its property assets could help re-rate the stock.
  • Entry price is S$1.00.
  • SPH's share price catalyst
    • Pick-up in footfall for retail malls and international students’ bookings 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/ 2020-08-24
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.22 DOWN 1.410