Singapore Press Holdings (SPH) - CGS-CIMB Research 2020-10-14: A Year To Forget


Singapore Press Holdings (SPH) - A Year To Forget

  • SPH (SGX:T39) sank into FY20 net loss of S$83.7m due to S$245.6m exceptional items, below our/consensus full-year forecasts. DPS of 2.5 Scts was also a miss.
  • Media posted its first PBT loss of S$11.4m; property offers recovery and inorganic growth opportunities to drive higher earnings and dividends.
  • We see value in SPH's property portfolio, and believe the higher net gearing and cautious outlook are largely in the price at 0.45x FY20 P/BV.
  • Reiterate HOLD.

SPH's FY20 miss on net profit and DPS

  • SPH reported FY20 PATMI loss of S$83.7m, which was a miss against our/consensus full-year forecasts, no thanks to S$245.6m exceptional items, which consisted of S$232m fair value loss on investment properties, S$27.5m impairment charges and S$25.7m divestment gain (a testament to the group’s capital recycling strategy). See SPH Announcements. Excluding these, FY20 core operating profit of S$139.5m would have been in line with our but below consensus.
  • Overall topline fell 9.8% y-o-y on the back of a 22.8% decline in media revenue, mitigated by 10.3% rise in property contribution (acquisitions of Westfield Marion, Student Castle portfolio and Galileo Residenz) and 8.7% higher other revenue (mainly from aged care).
  • SPH declared final DPS of 1 Scts, bringing FY20 DPS to only 2.5 Scts (or 2.4% yield), below our and consensus expectations. See SPH Dividend History.

Media registered its first core loss

  • SPH continued to face advertising headwinds in FY20. Its newspaper print and digital ad revenue dropped 32.9% and 6.2% y-o-y, respectively, as marketing budgets were scaled back, while circulation revenue was largely stable.
  • Multiple rightsizing exercises (S$16.6m retrenchment costs) and a S$28.1m job support scheme (JSS) could not save the media segment from its first PBT loss of S$11.4m. We expect it to remain loss-making in the near-term until revenue growth returns.

Mixed outlook for the property segment

  • While the retail environment for its malls in Singapore and Australia remains challenging, SPH benefitted from a bigger aged care portfolio, encouraging sales of its Woodleigh Residences (56% sold as at 4 Oct) and improving traction at its > S$1.4bn PBSA that has achieved 88% of AY20/21 target revenue.

Reiterate HOLD on SPH with lower EPS and SOP-based Target Price.

  • We cut our SPH's FY21-22F EPS by 11.1-18.4% to reflect further pressure on media earnings and a more gradual recovery in retail malls. Our SOP-based target price now pegged to 30% group discount (previously 25%) and includes S$0.21/shr worth of media business.
  • Despite the earnings miss, limited catalysts in the near-term and higher net gearing of 0.53x as of end-FY20, we think most of the negative news has been largely priced in at 0.45x FY20 P/BV and retain our HOLD rating.
  • See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
  • Upside/downside risks: COVID-19 containmentt/resurgence and value unlocking of its asset portfolio.

NGOH Yi Sin CGS-CIMB Research | https://www.cgs-cimb.com 2020-10-14
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.10 DOWN 1.350