Saying they were negatively surprised by the year-on-year decline in media revenue at SPH, CGS CIMB recently said that Singapore Press Holdings is now anchored by property.
The finance company pointed out that “SPH reported 2Q19 core PATMI of S$28.7m, which fell 29% yoy, mainly due to lower media topline (print ad sales -S$14.1m, circulation revenue -S$3.2m) and absence of investment income.”
It added that the Singapore Press Holding’s media business is still not a pretty sight.
“While 2Q is a seasonally weaker quarter, we were negatively surprised by the 13.8% yoy decline in media revenue (1Q19: -6.8% yoy), possibly reflecting some frontloading of sales in the prior quarter. Digital newspaper circulation grew 12% yoy to 23k copies and digital ad revenue rose 6.7% yoy in 1H19, but we think these digital initiatives would take more time before offsetting the revenue shortfall in the print business. The 12.9% yoy reduction in staff costs was unable to mitigate the 31.7% surge in average newsprint charge-out price, resulting in 2Q19 PBT margin of 7.3% (2Q18: 9.8%, 1Q19: 19.9%).”
“The property segment now forms 2/3 of SPH’s profits and delivered higher steady income stream from the recent acquisitions of SPH Reit (69%-owned subsidiary), Figtree Grove in Australia and the Rail Mall. SPH has also expanded its UK student accommodation portfolio to S$369m with two smaller assets in Lincoln and Glasgow; we expect more sizeable ones in the pipeline. The residential component of Woodleigh Residences is scheduled for official sales launch by May 2019.”
CGS-CIMB said that besides property, that SPH’s growth plan include digital transformation, aged care business.
“With the completed privatisation of M1 (and increased stake to 16.1%), we now project higher associates’ contribution for SPH, but think that any major digital transformation will be spearheaded by Keppel. Bed occupancy rate at its aged care operations remains healthy in the range of 80%, with possible expansion opportunities, both at home and overseas. We think execution is key to watch.”
Following CGS-CIMB’s report that Singapore Press Holdings is now being anchored by property, Singapore Press Holdings Limited on April 16 announced that it will acquire a portfolio of Purpose-Built Student Accommodation in the United Kingdom.
SPH’s wholly-owned subsidiaries, Straits Five Pte. Ltd, Straits Six Pte. Ltd. and Straits Eight Pte. Ltd. entered into a sale and purchase agreement with Habitus Holdings S.À R.L., Privilege Holdings S.À R.L. , Privilege Southampton Holdings S.À R.L. and AIGGRE Europe Real Estate Fund I GP S.À R.L to acquire a portfolio of Purpose-Built Student Accommodation (PBSA) assets in the UK for a cash consideration of approximately £133.7 million (approximately S$237.0 million).
The portfolio spans 3 cities in the UK and has a total capacity of 1,243 beds. They are situated in Southampton, Sheffield and Leeds, which have sizeable full-time student populations and enjoy strong occupancy rates in excess of 90.0%. The portfolio comes with a rental guarantee that covers the 2018/2019 and 2019/2020 academic years. This provides earnings visibility as SPH integrates the assets into its current portfolio of PBSA managed assets.
Adding to the recent acquisition of 380 beds in Lincoln and Glasgow, SPH’s PBSA portfolio has a total capacity of over 5,000 beds across 20 assets in 10 cities. The AUM is now in excess of S$600 million, establishing SPH as a leading PBSA player in the UK.
With an enlarged platform, SPH can extract greater economies of scale and has started operationalising its asset management capabilities under the new Capitol Students brand.
Singapore Press Holdings has developed on-ground operational expertise, with a dedicated team of 5 in the UK, 8 in Singapore overseeing the portfolio together with more than 100 employees managing the assets.
Sales and marketing capabilities have also been expanded, with a centralised marketing and sales office. A community portal is also being developed for the 2019/2020 academic year, supported with backend business processes and booking systems. The portal is envisaged to define the students’ experience and be the connection through which Capitol Students partners the institutions and parents on the students’ lifeshaping campus journey.
The world class higher education system in the UK is well-placed to grow, backed by rising demand from both local and international students. With a healthy student-tobed ratio, the asset class has demonstrated strong rental growth over the years.
Mr Ng Yat Chung, Chief Executive Officer of Singapore Press Holdings, said: “Since our first PBSA investment in September 2018, we have now successfully completed four acquisitions in the UK. These acquisitions are high quality, cash-yielding assets in key student cities in the UK and will enhance our recurring income going forward. We remain disciplined in our acquisition pipeline, to build our UK PBSA portfolio to a platform of scale.”
This transaction was completed on 16 April 2019.
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