Property Push by Singapore Press May Turn Its Stock's Fortunes

(Bloomberg) -- An increased focus on property investments may be a boon for Singapore Press Holdings Ltd., even as interest rates rise globally and the city-state’s policy makers warn of "euphoria" at home.

That’s the view of CGS-CIMB Securities Pte, which upgraded the shares on Wednesday to add from hold. It said management’s intent to earn more from real estate while stabilizing media operations, which contribute about 70 percent of sales, should add value to the company.

The ratings boost comes ahead of a scheduled third-quarter earnings report next week. Net profit is expected to grow by 41 percent on a sequential basis to S$56.6 million ($41.5 million), based on CGS-CIMB and UBS AG estimates.

The market value of the owner of the Straits Times newspaper fell below that of its peer New York Times Co. for the first time in 12 years in 2017 and the gap has now widened to $1.2 billion. Still, Singapore Press shares on Thursday erased year-to-date losses, bouncing up as much as 3.1 percent to the highest level since June 25.

"Upside could stem from media stabilizing and higher asset-management income," Ngoh Yi Sin, an analyst at CGS-CIMB wrote in the note. "Management is seeking new income source in overseas property asset management, for which we forecast 8 percent cash-on-cash returns, on average," she said.

Singapore Press may benefit from retirement homes or overseas student housing projects, higher sales from Woodleigh Residences and Bidadari projects in Singapore, and potential dividends from adding the city-state’s Seletar Mall into its real estate investment trust.

Management’s focus on digital media may slow a decline in earnings from its largest business unit, Ngoh said, while the shares seem to have already priced in a bleak outlook for the mainstream business.

©2018 Bloomberg L.P.