SINGAPORE (Sept 11): OCBC Investment Research is maintaining its “hold” call on Singapore Press Holdings (SPH) with an unchanged fair value estimate of $2.52, following the latter’s acquisition of a $321 million portfolio in the UK.
To recap, the portfolio comprises 14 buildings across six towns and cities in the UK and has a total capacity of 3,436 beds for student accommodation.
Its properties include 10 freehold assets and 4 leasehold assets, and are situated in established university towns and cities with large full-time student populations, including London, Birmingham, Bristol, Huddersfield, Plymouth and Sheffield.
In a Tuesday report, lead analyst Joseph Ng says SPH’s acquisition move was as anticipated, as he has expecting SPH to explore the real estate management market in the UK, specifically education-related assets, to diversify its income streams.
Citing recent admission figures from the Universities and Colleges Admissions Service (UCAS), he believes local demand for student accommodation in the UK should remain generally robust, although Higher Education Policy Institute (HEPI) data suggests demand of higher education places is generally determined by the size of the young population.
“Notwithstanding the projected demand, we think that there might be some short-term issues that the group might need to contend with,” cautions Ng.
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“For instance, in a 2017 report, Savills reported that while Plymouth has a high student to bed ratio of 3.7, the planning pipeline has almost 3,300 units committed, which amounts to 56% growth relative to existing supply,” he illustrates.
“Also, as highlighted by the HEPI, Brexit could have a disruptive effect on demand from EU students, unless special arrangements are negotiated,” concludes the analyst.
As at 2.54pm, shares in SPH are trading 8 cents higher at $2.71 or 20 times FY18 earnings.
