Where next for the SPH share price after being dropped by STI Index?

Shares of media group Singapore Press Holdings (SPH) continue to trade well below their 2020 peak.

As of Wednesday 17 June 2020, the company’s public stocks are being offered at a rate of S$1.36 apiece, based on the latest IG data.

This is nearly 40% below the highest traded price of 2020 so far of S$2.21 a share, achieved on 02 January – the year’s very first trading session. It is also roughly 47% below a 52-week high of S$2.55 a share, posted on 05 July 2019.

What’s the story behind SPH’s recent share price trajectory?

Since our last update, SPH’s share price has fallen further, with intermittent rises in between.

Between 21 May 2020 and 02 June 2020, the publishing company’s plunged 17.7%, as regional and global socio-political events shook investor confidence across all markets.

For instance, on Friday 22 May 2020, Singapore’s blue-chip stock benchmark Straits Times Index (STI Index) fell over 2% after it was reported that China’s rubber stamp parliament National People’s Congress would meet on Friday to debate a national security law that has been widely described as ‘controversial’.

The proposed law, which has since been passed in a bid to ban secession, foreign interference, "terrorism" and all seditious activities targeting the Chinese central government, has been widely described as Beijing’s response to the 2019 Hong Kong protests.

Conflicting reports on Covid-19 trial results by various US drug makers, also took stock markets on a rollercoaster ride.

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STI Index dropped SPH from its tally

Two weeks later, the STI Index’s operator FTSE Russell dropped SPH from its tally and a so-called ‘reserve list’, replacing it with Mapletree Industrial Trust, after the latter overtook SPH in market capitalisation. At the time of change, SPH’s market cap totalled S$2.18 billion, with Mapletree Industrial Trust’s coming in at S$5.83 billion.

An SPH spokesperson was then quoted as saying by The Straits Times: ‘The global economy, including Singapore, has been battered by the Covid-19 pandemic. SPH has not been spared in this challenging business environment.

‘However, we have a resilient balance sheet to weather the impact from Covid-19. We will continue to transform the media business with digital innovations and grow our recurring income as well as diversify our revenue streams.’

Being left out of the STI Index – which tracks the top 30 largest listings on the Singapore Exchange, however, did little to affect SPH’s share price, which was already significantly below its five-year moving average.

Following that, SPH’s share price had in fact risen by some 3%.

Not much has changed since then, with shares trading sideways for the most part.

Where do analysts see SPH going from here?

In May, CIMB analysts had rated the SPH stock a ‘hold’ alongside a share price target of S$1.57 per share, citing the group’s sound digital strategy, which had resulted in higher new digital subscription numbers across its news publications in the month of April, including The Straits Times (+40% month-on-month), The Business Times (+100% month-on-month) and Lianhe Zaobao (+138%).

They forecasted that the growing digital reach would benefit SPH’s circulation revenue and reduce newsprint costs, possibly mitigating weaker advertising demand in the near-term.

Meanwhile, UOB analysts had reiterated a ‘hold’ rating alongside a slighter higher 12-month share price estimate of S$1.52. They also provided an entry price target of S$1.30 for the instrument.

Their main reasoning for the increased price target was that SPH ‘looks set to further unlock value from its non-core assets’, as it continues to adopt its capital recycling approach with the recent divestment of its AXA Tower stake and Buzz newsstand chain.

On the media front – its core business, UOB is of the opinion that the group’s recent partnership Google will help to improve ad spend. Finally, they stated that SPH’s student accommodation business is still receiving healthy bookings, while its Australian retail properties are also starting to see a recovery in footfall.

How to trade SPH stocks with IG

Are you feeling bullish or bearish on Singapore Press Holdings (SPH) and other SGX-listed stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's world-class trading platform in a few easy steps:

• Create a live or demo IG Trading Account or log in to your existing account
• Enter <company name> or <ticket code> in the search bar and select it
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