SINGAPORE (June 6): UK universities could benefit from the US-China trade war that has prompted China to issue an official warning to students hoping to study in US universities, says UOB KayHian.
This spells good news for Singapore Press Holdings (SPH) which is diversifying into the purpose-built student accommodation (PBSA) business in the UK.
In addition, refinancing of a £205 million ($314 million) term loan facility to a longer tenure also shows SPH is committed to its long-term investment in the UK PBSA (purpose-built student accommodation) business.
“Maintain ‘buy’ and target price of $2.86,” says UOB lead analyst Lucas Teng on SPH.
On June 3, the Education Ministry of China urged Chinese citizens to assess the risk before attempting to get US visas as some Chinese students have faced issues in visa application and extension. There have also been accounts of dismissal of Chinese academics from US universities.
According to the US Department of Homeland Security, China is the largest source of international students in the US, accounting for 31% of the total.
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To be sure, UK universities have seen a significant increase in Chinese undergraduate students, with enrolment increasing by up to 9% in 2017/18, according to Higher Education Statistics Agency (HESA).
In Jan, Chinese applicants rose 33% y-o-y to a record high, says University and College Admissions Service (UCAS).
Meanwhile, the UK Department of Education is aiming to increase the number of international students by 30% from 460,000 currently to 600,000 by 2030 with new measures including the provision of visa extensions for international students looking for post-study work.
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Meanwhile, booking rates for SPH’s PBSA assets ahead of the new academic year seem to be in good shape. Acquisitions made in April have already seen a substantial amount of beds sold out for the school term.
Compared to competition in the area, customer ratings of SPH dorms are also higher, with better reviews commenting on their more premium quality and service.
“We believe the assets in the April acquisition are likely to be more sustainable in the long term, given on par or better popularity among competition in the vicinity,” says Teng.
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Recently, SPH completed the divestment of Chinatown Point, a continuation of its capital recycling exercise in favour of higher-yielding PBSA assets.
SPH’s current acquisitions in PBSA amount to $20 million in estimated net profits and growth may be expected upon further acquisitions.
SPH is looking for premium quality accommodation, revolving around upper mid-tier universities, as these are likely to be more sustainable.
As at 3.33pm, shares in SPH are down 1 cent at $2.30 or 18.1 times FY20F earnings.
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