Singapore Press Holdings needs a boost from non-media segments, says CGS-CIMB Research analyst Eing Kar Mei in a note dated Jan 5.

The group’s media business may have made an earnings before interest and taxes (EBIT) loss of $9.4 million due to Covid-19 in FY2020, Eing believes the department may see improvement in the near term given the improving business sentiment and low base effect during the financial year.

“However, in the long term, we continue to see structural decline risks in the industry as advertisers allocate a larger portion of their budgets to the digital and social media platforms,” she says.

The group’s property business should also deliver a stronger performance in FY2021F, says Eing.


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“Barring another major lockdown, we believe its retail business which was mired by temporary closures and rental rebates should improve in FY2021. While we expect its retail malls to continue to face rental pressure due to weak operating environment, overall revenue performance in FY21F should be better versus FY2020.”

The group’s purpose-built student accommodation (PBSA) achieved 88% of its targeted revenue in the academic year 2020/2021 (from September 2020 to mid-2021).

Eing believes that the latest lockdown in the UK may have a smaller impact on SPH, after going through the first lockdowns and hassles of returning home and to universities.

“Rental refunds for PBSA of £4.5 million ($8.1 million) in FY2020 were at the lower end of the expected £4 million to £8 million,” she notes.

“Bed occupancy rate of Orange Valley Singapore rose from 75% in Sep 2019 to 80% in Aug 2020 despite the stiffer competition. Master lessees for its Japan aged-care business continued to pay rent in full on a timely basis, while underlying portfolio occupancy stayed a high 90%,” she adds.

Due to the lower base effect in 4QFY2020, Eing foresees stronger q-o-q results in the 1QFY2021, excluding Covid-19-related grants.


SEE: UOB Kay Hian maintains its 'hold' call on SPH for undemanding valuation and uncertainty on impact of its property assets


This, she says, may also be due to “seasonally stronger ad spend in 1Q on events such as Black Friday and Cyber Monday, more students returning to UK, and lower rental rebates to tenants in its retail malls”.

“On a y-o-y basis, while financial performance of the property business should be stronger due to acquisitions (Student Castle, Westfield Marion, aged-care assets in Japan), we think it could be offset by weaker media performance due to Covid-19 and the structural decline,” she adds.

To this end, Eing has maintained “hold” on the counter with an unchanged target price of $1.10.

“While we think the stock has limited catalysts, downside has been priced in at 0.5x price-to-bok value or P/BV (-2 standard deviation or s.d. from 5-year mean); the stock offers 3-5% dividend yield. If we ascribe zero value to media, our target price, which has imputed a 30% holding discount, will fall to 95 cents,” she says.

Shares in SPH closed flat at $1.13 on Jan 6.