SPH - Upgraded TP $2.29

 1H FY21 Results Summary (Half year ended 28 Feb 2021)

- Revenue decreased 4.2% YOY to $460.3 mn

- Operating profit increased 16.6% YOY to $119.8 mn (contributions of $15mn from JSS)

- Continued decline in media arm, with revenue falling from $253.8 mn (1H FY20) to $193.1 mn (1H FY21). Profit before tax dropped from $10.6 mn to $3.1 mn. Without JSS, the pre-tax loss will be $9.7 mn.

- Print advertisement revenue dropped 29% YOY (partly due to COVID), with falls in display and classified ads.

- Digital revenue growing, with digital circulation contributing 31.6% of total digital revenue, increasing from 23% a year ago.

- Total circulation now comprises 53% digital, showing a clear shift towards digital circulation.

- Revenue for SPH's retail and commercial division (SPH REIT) increased 4.4% YOY to $154.6 mn, with tenant sales in Paragon and Clementi Mall (SPH REIT's Singapore properties) reverting to normal as COVID restrictions eased.

- SPH REIT launched Woodleigh Residences in Feb 2021, with 62% of total units sold to-date, with PSF prices increasing

- Net profit for SPH's retail and commercial division therefore remained flattish, dropping 1.4% YOY despite COVID.

- Student accommodation in UK showed strong revenue growth, rising 24.2% YOY to $35.3 mn (Student Castle portfolio), despite the COVID situation (students deferring studies and lower occupancy rates in general).

- Net profit before taxes for the Student accommodation division was $22.4 mn

- Orange Valley nursing home and Japan aged care facilities showed a small profit before tax of $0.3 mn for the half year

- Investments portfolio showed significant gains: iFAST (SGX: AIY) and Coupang IPO (NYSE: CPNG). Both iFAST and Coupang doing well in the market. 

- Strategic review to unlock shareholder value, with Credit Suisse appointed as group's financial advisor.

- Interim Dividends doubling from $0.015 a year back to $0.03.

Upcoming Catalysts

- Strategic review to unlock shareholder value, such as privatisation of its print and media arm

- Swing into profitability owing to increased focus on digital divisions; and owing to investment division and aged care facilities reaping fruits over time. This will also be aided by further easing of COVID restrictions, with possible resumption of tourism: SPH REIT (Clementi and Paragon malls), UK Student Accommodations being key contributors to profit

- More positive announcements pertaining to its venture capital division; its investments into new and promising companies should reap fruits over time (one example was Coupang)

- Further increase in dividend payout ratio and yield

- Further indications as to how SPH plans to diversify away from its ailing print and media arms and take further steps to become a diversified conglomerate

Technical Analysis

Weekly chart: When sghuat first discussed SPH, SPH was trading in the $1.2x range and has since burst up almost 50% to $1.78

Key support levels to accumulate SPH in increasing batches: $1.72-1.75, $1.6 and $1.5

First Target Price: $1.95

Second (Final) One-Year Target Price: $2.29