Singapore Press Holdings (SPH) - UOB Kay Hian 2021-01-21: Seeing Improvement, But Still Not In The Clear


Singapore Press Holdings (SPH) - Seeing Improvement, But Still Not In The Clear

  • SPH’s media print ad revenue showed marginal signs of relief, although the risk of secular decline remains. While the non-media segment performed well, especially its retail property, uncertainties remain on the group’s ability to offset its media segment decline.
  • SPH is trading at a discount of 0.6x book value, but near-term catalysts are lacking. Maintain HOLD with SOTP-based target price of S$1.22. Entry: S$1.05.

SPH's 1QFY21 operational updates.

Advertising: Marginal improvement, though risk of secular decline remains.

  • SPH's total print ad revenue declined 36% y-o-y in 1QFY21, a marginal improvement on a q-o-q basis (4QFY20: -40% y-o-y).
  • SPH noted PWC’s Media Outlook report which forecasts that global newspaper ad will decline 27% from 2019-24, due to the secular trend of advertisements migrating to digital platforms. However, given the low base of ad revenue during the circuit breaker period, a q-o-q improvement will likely be the case in 1HFY21, especially with advertising from festive events (eg Christmas, Chinese New Year) as well as real estate recovery.

Circulation: Digital surpasses print.

  • Overall, daily average newspaper circulation grew 1.8% y-o-y, with digital circulation making up 52% of all circulation, surpassing print circulation.
  • SPH continues to see a good pick-up rate in its News Tablet subscription, boosting digital circulation growth to 27% y-o-y. Management continues to strengthen its digital presence with the launch of Business Times News Tablet in Sep 20. We think news subscription prices are still relatively low, and prices could be potentially lifted.

Property: Retail recovery, but still susceptible to COVID-19 measures.

  • Paragon saw an improvement in tenant sales in Nov 20 (-15% y-o-y) compared with preceding months of Sep 20 and Oct 20 (down 29% y-o-y and 28% y-o-y respectively). Footfall also recovered across the Singapore malls during the year-end festive period.
  • On the Australia front, Westfield Marion took a dip in tenant sales and footfall in Nov 20 due to South Australia experiencing a second lockdown as part of their COVID-19 measures against a resurgence of cases.

Purpose-built student accommodation (PBSA) steady for now…

  • SPH’s PBSA assets achieved 88% of target revenue for the academic year (AY) 20/21 while bookings for the following academic year (AY21/22) have started with 17% of target revenue achieved as at 8 Jan 21.

…although the return of international students remains a worry.

  • Management noted that international students could still face issues in returning to the UK due to flight restrictions. In addition, there have been on-the-ground petitions by students to receive rental rebates. Unite Students, the UK’s largest owner, manager and developer of PBSA assets, had recently announced rental discounts in light of the lockdown by the UK government. Eligible students will be able to apply for a discount of 50% of their rent for a total of four weeks and given a four-week complimentary extension of their tenancy agreement.
  • Currently, SPH noted that they will not be offering rental refunds as its PBSA assets are still relatively well occupied by students.

Watching for borders.

  • We opine that border reopening will be a substantial positive for SPH as:
    1. Paragon, which accounts for approximately 40% of the group’s property income is still supported by tourist receipts. In our view, a full recovery will require tourist expenditure in the mall; and
    2. international students could return to the UK to resume their accommodation at the PBSA assets.

Property: Seeing improvement, but still not in the clear.

  • Management noted the improvement in SPH REIT (SGX:SK6U)’s retail assets, although it remains to be seen if there are any short-lived effects from end-of-year retail expenditure. We opine that given property assets are faring better as compared to the end of financial year valuation review in Aug 20, a loss in fair value might be less probable for SPH in FY21.

SPH - Valuation

Lucas Teng UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2021-01-21
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.22 UP 1.120