Singapore Press Holdings

Price targets:

$2.30 HOLD (UOB Kay Hian Research) $2.22 HOLD (CGS-CIMB Research) $2.19 HOLD (DBS Group Research) $2.28 HOLD (OCBC Investment Research)

UOB Kay Hian is raising its target price for Singapore Press Holdings (SPH) by 2.2% to $2.30, after the group in December last year acquired seven purpose- built student accommodation (PBSA) assets in the UK. However, the brokerage is keeping its “hold” call on SPH.

“While asset quality looks relatively assured, the decline in its media business does not appear to be abating,” UOB lead analyst Lucas Teng says in a Jan 6 report.

SPH announced Dec 23 that it is acquiring the properties – five operational PBSA assets with a capacity of 1,662 beds, and two developmental assets with 721 beds – for GBP448 million ($807 million).

According to Teng, this brings SPH’s total portfolio to over 7,726 beds with total asset under management (AUM) of a “sizeable” $1.4 billion.

The analyst notes that the new operational assets are “premium assets” and enjoy “strong tenure rates” of close to full occupancy. However, he adds that the recent acquisitions have a slightly lower net initial yield of 4.8-5.6%.

In comparison, SPH’s initial acquisition of the Mayflower portfolio in September 2018 had a net initial yield of 6.3%, while its purchase of the Privilege portfolio in April 2019 had a net initial yield of 5.2-5.5%.

Meanwhile, Teng cautions that SPH’s core media business is “not out of the woods yet”.

“According to our page count of the Straits Times for 1QFY2020 ended Nov 30, 2019, total page count was down 11.7% y-o-y, a similar rate of decline as in the previous quarter,” Teng says. “The three segments – Recruit, Classifieds, and Display – saw a 25%, 22% and 9% y-o-y drop in page counts respectively and does not appear to be abating yet.” —