Singapore Press Holdings (SPH) - UOB Kay Hian 2021-07-21: Recovery In Sight For UK Assets


Singapore Press Holdings (SPH) - Recovery In Sight For UK Assets

  • SPH (SGX:T39)’s media restructuring EGM is slated for Aug-Sep 21. The media segment continues to see ad revenue dip while facing challenges on the cost front.
  • Looking beyond, SPH’s student accommodation assets are seeing better prospects with the expected return of international students. In developing its asset management capabilities, we opine that a potential spin-off of the student accommodation assets could unlock value.
  • Maintain BUY call on SPH with a higher SOTP-based target price of S$2.00.

SPH's 3QFY21 operational updates.

Media: Restructuring in progress; advertising slips again.

  • Total print ad revenue declined 18% y-o-y in 9MFY21 while revenue for the media segment declined 17% y-o-y. The secular decline in print ad continues while certain ad sectors affected by COVID-19 have yet to show a significant recovery. SPH’s proposed restructuring plans are still in progress with an EGM slated between Aug-Sep 21.
  • While digital circulation continues to rise, growing 18% y-o-y, we note that circulation revenue is only approximately 25% of total media revenue and is unlikely to offset the decline from ad revenue.
  • SPH also noted challenges on the cost front, with rising newsprint prices due to shrinking supply from mill closures as well as continual IT investments required for its digital offerings.

Property: Retail recovery; watching for stability.

  • For SPH REIT (SGX:SK6U), the group saw improved occupancy rates in 3QFY21, up to Marion increased 0.6% q-o-q. Both assets are dominant assets in their respective locations of Wollongong, New South Wales and Adelaide, South Australia.

Purpose-built student accommodation (PBSA) showing good booking momentum.

  • SPH’s PBSA assets achieved 74% of target 52% of current bookings for Student Castle coming from Chinese students.

Return to normalcy in the UK.

  • The UK government has recently confirmed that there will be no UK Student Accommodation Fund property portfolio saw a 1.4% q-o-q increase in valuation as of Jun 21.

Managing UK assets.

  • SPH is also developing its asset management capabilities, in which it is planning to manage all its UK assets in-house by 12 Oct 21.
  • SPH is also setting up a private fund to develop its pipeline of developmental projects in student accommodation.

Capital recycling from SPH's digital assets?

  • Opportunities exist for SPH to monetise its digital portfolio. This includes Coupang, in which the group will get its existing shares after the lock-up period ends in Sep 21.
  • SPH also has a 2% stake in Carousell, which is currently exploring a merger with a SPAC in a potential US$1.5b IPO.

Earnings Revision

  • None.

SPH - Valuation & Recommendation

  • Maintain BUY call on SPH with a higher SOTP-based target price of S$2.00, taking into account the higher SPH REIT share price, as well as a higher valuation adjustments (post-restructuring) would lower our target price slightly to S$1.93, given a change in:
    1. SPH REIT’s holdings,
    2. cash, and
    3. higher share base (from SPH shares given to the CLG).
  • See
  • In our view, SPH remains poised to unlock value from its assets, potentially through a spin-off of its student accommodation assets.
  • Catalyst to SPH's share price
  • Pick-up in international students’ bookings for student accommodation assets.
  • Restructuring of media business.
  • Unlocking of value from capital recycling.

Lucas Teng UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-07-21
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