Singapore Press Holdings (SPH) - CGS-CIMB Research 2021-03-31: Shareholders’ Value Unlocking On The Cards


Singapore Press Holdings (SPH) - Shareholders’ Value Unlocking On The Cards

  • SPH’s 1HFY21 core net profit of S$85m exceeded street’s estimates.
  • SPH is undertaking a strategic review to unlock shareholders’ value.
  • The stock is undervalued. Upgrade to ADD, with a higher SOP target price of S$2.09.

Lower operating cost and higher investment income drive profit

  • SPH (SGX:T39)’s 1HFY21 (Sep 2020 to Feb 2021) core net profit of S$85m (+26% y-o-y) came in above expectations vs our and consensus full-year net profit forecasts of S$100m and S$110m.
  • SPH's better-than-expected 1HFY21 core net profit was mainly driven by
    1. lower operating expenses (-10% y-o-y), in particular material, production and distribution costs (-40% y-o-y) of the media business,
    2. higher investment income, mainly due to higher dividend income (+176% y-o-y) and
    3. higher other operating income. 1HFY21 revenue of S$460.3m (-4.2% y-o-y) came in line at 52% of our FY21F.
  • SPH declared S$0.03 dividend per share in 1HFY21 vs S$0.025 declared for FY20. See SPH Dividend History.

Media continued to see weakness

  • SPH's media business continued to see a structural decline. See SPH Announcements. 1HFY21 revenue fell 24% y-o-y to S$61m, led by a 29% y-o-y decline in newspaper print ad revenue and absence of revenue from Buzz which was divested in Jul 2020. PBT was S$3.1m but if excluding JSS grant income of S$12.8m, the media segment would have reported a PBT loss of S$9.7m.
  • The higher digital circulation revenue (+40% y-o-y) was insufficient to offset the decline in print ad revenue (-29% y-o-y).

Property businesses recovering well

  • SPH's retail and commercial’s 1HFY21 revenue increased 4.4% y-o-y to S$154.6m while PBSA’s revenue was up 24% y-o-y to S$35.3m due to six-months’ contribution from the acquisition of Westfield Marion and Student Castle portfolio, respectively. Most of its retail malls saw tenant sales tracking closely with pre-COVID levels.
  • On PBSA, students are gradually returning to campuses. It has achieved 84% of target revenue for Academic Year (AY) 20/21 as at 26 Mar 2021. Bookings have started for AY 21/22 with 28% of target revenue achieved as at 26 Mar 2021 (from 17% as at 8 Jan 21).

Upgrade SPH to ADD with a higher SOP target price of S$2.09

  • See SPH Share Price; SPH Target Price; SPH Analyst Reports; SPH Dividend History; SPH Announcements; SPH Latest News.
  • The Board of Directors believes that SPH remains undervalued and it is undergoing a strategic review to unlock shareholders’ value. It has engaged a financial advisor for this purpose.
  • We raise our FY21-22F net profit forecasts for SPH by 36% to 60%, mainly to factor in lower operating cost, higher revenue from retail malls and investment income. We also increase our FY21-23 dividend forecast as we see less reason to conserve cash given the recovering property businesses.
  • Our SOP-based target price is raised to S$2.09 as we also expand our SOTP valuation to include more of its assets and reduce holding discount from 30% to 20% (as we see signs of a recovery for most of its property businesses). See the SOTP breakdown in report attached below.
  • Upside/downside risks include the successful unlocking of shareholders value/resurgence of COVID-19 cases.

EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-03-31
SGX Stock Analyst Report ADD UPGRADE HOLD 2.09 UP 1.310