UOB Kay Hian has upped its target price for Singapore Press Holdings (SPH) accompanying its “buy” call after the company released its 3Q2021 business update on July 19.
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UOB Kay Hian analyst Lucas Teng has raised his sum-of-the-parts valuation for SPH to $2.00 on the back of the higher SPH REIT price, as well as a higher valuation of SPH’s student accommodation assets.
In its business update, SPH disclosed that its EGM seeking approval for its media business restructuring will be scheduled sometime in August or September. “The media segment continues to see ad revenue dip while facing challenges on the cost front,” Teng notes.
His valuation for SPH presently already excludes any valuation in the media segment. “Any adjustments (post-restructuring) would lower our target price slightly to $1.93, given a change in: a) SPH REIT’s holdings, b) cash, and c) higher share base (from SPH shares given to the company limited guarantee),” he adds.
On the non-media side, Teng is bullish on SPH’s purpose-built student accommodation (PBSA), which he says shows “good booking momentum” and is on track to achieving portfolio occupancy of more than 90%.
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Noting that in-person teaching and learning in UK universities are expected to resume without restrictions on August 16, Teng views this may encourage the return of international students and subsequently a return to normal levels of occupancies for student accommodation.
Teng believes revaluation gains may also be expected for the group’s PBSA assets. He draws comparisons to peers including Unite Group, which saw its UK Student Accommodation Fund property portfolio reap a 1.4% q-o-q increase in valuation as of June.
SPH disclosed that it is developing its asset management capabilities and intends to manage all its UK assets in-house by October 12. It is also setting up a private fund to develop student accommodation projects.
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“In developing its asset management capabilities, we opine that a potential spin-off of the student accommodation assets could unlock value,” says Teng.
For its other property assets, Teng highlights SPH REIT saw improved occupancy rates at its malls and reduced rental relief in the 3Q2021. He anticipates retail recovery to boost Singapore tenant sales in the 4Q coming out of the tightened measures, while Australian malls have remained resilient.
Teng also notes that opportunities exist for SPH to monetise its digital portfolio, which includes shares in Coupang which it can divest after the lockup period ends in September. “The group also has a 2% stake in Carousell, which is currently exploring a merger with a SPAC in a potential US$1.5 billion IPO,” Teng remarks.
Shares in SPH closed flat at $1.80 on July 21.
Photo: Albert Chua/The Edge Singapore
