Singapore Press Holdings (SPH) - UOB Kay Hian 2021-03-31: 1HFY21 Earnings & Dividends Above Estimates; Review Amid Media’s Decline.


Singapore Press Holdings (SPH) - 1HFY21 Earnings & Dividends Above Estimates; Review Amid Media’s Decline.

  • SPH's 1HFY21 core earnings of S$69m was ahead of expectations, aided by recovery from its retail property as well as lower production & distribution costs.
  • SPH announced a strategic review, noting the hard-hit media business. If a transacted sale of the segment were to take place, we see that this could potentially lift a key overhang on the counter.
  • SPH also shone some light on its digital portfolio, where it continues to undergo proactive capital recycling.
  • Maintain BUY on SPH with a higher target price of S$1.85.


1HFY21 core net profit of S$69m, down 7% y-o-y; interim dividend higher at 3 cents.

  • Singapore Press Holdings (SPH, SGX:T39)'s 1HFY21 core earnings was ahead of our expectations, making up 63% of our and consensus’ full-year estimates. Headline profits came in at S$97.9m (+26% y-o-y), which includes other items such as divestment gains of the exhibition business as well as the JSS government grant.
  • Interim dividend was higher at S$0.03 per share (1HFY20: S$0.015), a positive improvement of dividends for SPH.
  • Revenue was down 12% y-o-y while core operating profit of S$121m was down by 7% y-o-y.

Undergoing strategic review.

  • A note-worthy announcement was also made by the group, in which SPH is undergoing a strategic review, noting that the media segment continues to face a challenging operating environment. No details were released nor were there any assurances that the review will result in any transaction for the media business.

Media: Still affected by structural decline.

  • SPH notes that excluding the JSS grant, the media segment’s pre-tax loss would have been S$9.7m in 1HFY21.
  • While print ad revenue recovered on a h-o-h basis (+19% h-o-h), it was still down substantially compared with the previous year (-28% y-o-y), highlighting the adverse impact of the structural decline accelerated by COVID-19.
  • There were some cost reductions as well – materials, production and distribution costs were reduced by 41% y-o-y, in line with lower revenue of the media business and the exhibitions business.

Retail and commercial property: Recovery in progress.

  • SPH REIT (SGX:SK6U) properties saw recovering distributions, with 2QFY21 DPU up 3.3% q-o-q. Paragon’s revenue was only down 8% y-o-y in 1HFY21 (vs -32% y-o-y in 2HFY20). While tenant sales continues to be affected by tourist arrivals due to border restrictions, occupancy had only dipped slightly -0.7ppt h-o-h, aided by retail consumption from locals.

Student accommodation assets: Awaiting the return of international students.

  • Target revenue for the current academic year (AY20/21) dipped slightly to 84% though it remained fairly resilient. Bookings for the following academic year (AY21/22) are currently at 28% of target revenue achieved as at 26 Mar 21 (previously 17% in Jan 21).
  • Demand for UK education still remains high, as seen from the high volume of university applications. We believe that the international student accommodations will likely pick up in the next academic year, as vaccinations in the UK become more widespread.

Changes to other businesses.

  • SPH also recently disclosed that it has Temasek’s exhibitions business. SPH now owns a 40% stake in the JV entity. See SPH's announcements.


Potential transaction for the media business?

  • The media segment has been hard hit by a regulated business in accordance to the Newspaper and Printing Presses Act of Singapore.


Raise SPH's FY21-23F earnings forecast by 11-13%.

  • We factor in better contribution from SPH REIT’s retail property as well as lower materials, production and distribution costs from the media and exhibition business.


Raise SPH's SOTP-based target price by to S$1.85.


  • Pick-up in 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 | https://research.uobkayhian.com/ 2021-03-31
SGX Stock Analyst Report BUY MAINTAIN BUY 1.83 UP 1.740