She notes that the better-than-expected 1HFY2021 core net profit of $85 million was mainly driven by lower operating expenses, in particular from material, production and distribution costs which decreased 40% y-o-y, as well as higher investment income and increased other operating income.
While media business continued to see a structural decline with media revenue dropping 24% yoy to $61 million, Eing says SPH’s property businesses have recovered well.
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Retail and commercial revenue increased 4.4% y-o-y to $6.5 million while purpose-built student accommodation (PBSA) revenue was up 24% y-o-y to $6.9 million due to six months contribution from the acquisition of Westfield Marion and Student Castle portfolio respectively.
Eing’s higher target price is underpinned by raised net profit forecasts for FY2021 to FY2022 by 36% to 60%, mainly to factor in lower operating cost, higher revenue from retail malls, and investment income. She also increased the FY2021 to FY2023 dividend forecast as she sees less reason to conserve cash given the recovering property businesses.
“Our sum-of-parts (SOP)-based target price is raised to $2.09 as we also expand our SOP valuation to include more of its assets and reduce holding discount from 30% to 20% as we see signs of a recovery for most of its property businesses,” she adds.
For UOB KH analyst Lucas Teng, a potential sale of SPH’s media segment could lift a key overhang on the counter. He notes that SPH’s carrying value of the media business is about $180 million.
See also: UOBKH raises TP on SIA to $6.22, FY2026 earnings to see lift on fuel cost savings
He maintains his ‘buy’ rating for SPH, with a higher target price of $1.85 from $1.74 previously.
SEE:UOB Kay Hian maintains its 'hold' call on SPH for undemanding valuation and uncertainty on impact of its property assets
His higher target price is underpinned by raised FY2021 to FY2023 earnings by 11% - 13% on better contribution from SPH REIT’s retail property as well as lower materials, production, and distribution costs from the media and exhibition business.
The revised SOP-based target price also reflects management’s updated guidance on the breakdown of its digital business investments, including carrying values for SgCarMart of $50 million, its media fund portfolio (including Coupang) of $143 million, and its data centre portfolio of $22 million.
As at 10.49am, shares in SPH ar up 5 cents or 3.33% higher at $1.55.
