Is there an end in sight for the SPH share price collapse?

Media and property conglomerate Singapore Press Holdings (SPH) continues to see its already eroded share price decline, despite new business financial assistance packages unveiled by the Singapore government.

SPH shares are currently trading at S$1.59 per share (16:30 SGT, 07 April).

The Singapore government announced a third economic stimulus on Monday 06 April, among which it stated that it would pay 75% of the first S$4,600 of monthly salaries for all local employees for the month of April 2020.

SPH’s share price crash started in July 2019

The coronavirus pandemic, which has gripped equity markets everywhere, has only made matters worse for the former blue-chip stock.

Even before the outbreak of Covid-19, share price of SPH was already on a downward slide, one dating back to the middle of last year.

Since July 2019 – when SPH’s securities hit their 52-week peak, shares have lost over 39% of their value. That month, share price slumped as much as 4.02% in a single day, after it posted a 44% fall in net profit for the third quarter, amid a challenging environment for its media business which led to falling print advertisement and lower circulation revenue.

In the last one week, SPH has seen its share price drop by an even more pronounced amount, as the number of coronavirus cases in Singapore and locations where it operates (including the UK) escalated.

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SPH’s UK assets to lose an estimated £4-8 million in revenue

Last Wednesday 01 April, the group also provided an update regarding the coronavirus’ impact on its UK purpose-built student accommodation (PBSA) assets. It stated in a press release that it expects a loss of revenue of £4-8 million till the end of the financial year, with occupancy rates falling after the UK government ordered a three-week lockdown to tackle the spread of the coronavirus.

While universities must continue essential services and cannot be fully locked down, all universities in the UK have now moved to online teaching for the remainder of the 2019/2020 academic year.

In response, SPH is offering students the option to leave their tenancies early for the rest of the academic year, adding that students who choose to return home will not have to pay rent. Refunds will also be made to students who have already paid up to the end of the term.

As of 30 March, all 25 of the group’s PBSA assets under the Student Castle and Capitol Students brands across 15 UK cities continue to be in operation, with the majority of students still staying behind.

Following that, SPH’s stocks plunged by 15.3% to a historic low of S$1.55 per share on 06 April. This is nearly 40% below the levels recorded during the 2008/2009 global financial crisis.

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SPH REIT saw investor payouts plunge by 78.7% in Q2

SPH’s real estate investment trust (REIT) arm also reported its second quarter net property income for the 2020 financial year last week, which came in at S$56.6 million, a year-on-year increase of S$10.6 million (23.3%).

However, distribution per unit (DPU) – cash payments made to individual investors – for the quarter was S$0.30 per share, a decline of 78.7%, compared to the same quarter last year. The group stated that ‘this distribution is modest in light of the challenging circumstances arising from the Covid-19 situation in the months ahead’.

SPH REIT Management has stated that retail and food and beverage businesses in Singapore and Australia are ‘significantly impacted’ as a result of the the stricter measures rolled out in the last week of March 2020 to control the spread of Covid-19.

Analysts predict a 35% drop in dividend payout for 2020

On the back of these developments, analysts from UOB have cut their ratings and 12-month price targets on the stock to ‘hold’ and S$1.61 (from S$2.04) respectively. They also proposed an entry price of S$1.40 per share.

They added that they have also reduced their 2020-2021 net profit forecasts for the group by 16-19%, citing the rent rebates given by SPH REIT amounting to nearly S$5 million, as well as lower student accommodation revenue.

Finally, they posit that a recovery for all SPH business units is likely to occur only starting from the fourth quarter onwards. As such, they estimate that dividend payout for 2020 will be S$0.08 per share, representing a 35% cut from 2019’s full-year payout of S$0.12 per share.

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