SINGAPORE (June 26): UOB Kay Hian analysts Lucas Teng and John Cheong have maintained their “hold” call on Singapore Press Holdings (SPH) with an unchanged target price of $1.52, which represents a 11.7% upside on the stock.

“While valuations appear undemanding, better clarity from the impact on its property assets could help re-rate the stock. For the student accommodation assets, much will depend on the take-up rate in July as the deadline for universities’ acceptance was recently concluded,” they say.

SPH is the largest print media group in Singapore with a portfolio of retail mails via its 66%-owned company SPH REIT.

On June 4, the publishing company found itself removed from the Straits Times Index for its price weakness.

See: Mapletree Industrial Trust to replace SPH in the STI

Teng and Cheong believe the company’s 3Q20 results will bear the brunt of the stay-home measures, on top of uncertainties from its media business.

SPH’s advertising revenue is also likely to dip further, which could lead to a cycle of reduction in funds for content, and subsequent advertiser support.

According to a recent report by advertising agency Group M, the decline in print media advertisement for 2020 is happening at an accelerated rate compared to previous years. This year, advertising revenue is likely to register a 25% dip y-o-y.

As such, the analysts have factored in a 20% decline in the company’s advertising revenue in FY20.

The gradual re-opening of the circuit breaker measures will likely gain traction from the suburban malls in SPH REIT’s portfolio. However, Paragon Mall, which contributes some 60% of revenue for the REIT, may see a slower recovery due to its luxury portfolio, and the prolonged disruption to tourism.

“Thus far, SPH REIT had already provided total rebates averaging 2.3 months. Weathering further storms will be dependent on its ability to mitigate headwinds, and given the REIT’s low gearing ratio of 29% as of 1HFY20, this will likely put it in a better position to do so,” say the analysts.

“We note that SPH’s share price performance year-to-date of -38% is much weaker vs SPH REIT’s -17%, despite SPH’s 66% ownership in SPH REIT,” they add.

SPH’s purpose-built student accommodation (PBSA) portfolio in the UK may also see an uptick, with the continuation of in-school activities.

According to Universities College Admissions Service (UCAS), only 31,380 applicants had deferred at least one of their university application choice as of early-June.

Preparations for in-person teaching are also underway for the majority of the universities. According to a study by Universities UK, 97% of the universities surveyed said that they will begin in-person teaching at the start of AY20/21.

“The group continues to review its non-core businesses and investments. We had previously noted the group owns a sizeable industrial property in Genting Lane, which in our view could provide an opportunity for consolidation of operations to further unlock value from its assets,” they conclude.

Shares in SPH closed 2 cents lower, or 1.5% down, at $1.30 on Friday.