Broker's take: UOB Kay Hian upgrades SPH to 'buy'; raises target price to S$2.25

UOB Kay Hian has upgraded Singapore Press Holdings (SPH) to "buy" and raised its target price to S$2.25 from S$2.22, citing that valuations are attractive following the broad market selloffs in recent weeks.

Shares in the media and property group, which publishes The Business Times, were trading S$0.14 or 8.1 per cent higher at S$1.88 as at 11.40am on Tuesday.

In a report dated March 9, UOB Kay Hian analysts Lucas Teng and John Cheong said: "At current share price levels, SPH provides an attractive dividend yield of 5.8 per cent with a growing base of recurring income from defensive assets - aged care and student accommodation - which are more resilient to economic downturns."

SPH has expanded its aged care portfolio through two acquisitions in late February, which the analysts noted "tap on to the ageing trend in developed markets which have seen resilient demand".

The company acquired six aged care assets in Canada for C$232.9 million (S$239 million) and purchased five aged care assets in Japan for a total of 5.26 billion yen (S$69 million).

"The addition of aged care assets strengthens SPH recurring income as well as complements its aged care operations (Orange Valley) in Singapore," Mr Teng and Mr Cheong said.

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These acquisitions along with other aged care and student accommodation assets are expected to increase the group's recurring income base, they added.

Moreover, the analysts are expecting "more additions in cash-yielding assets in defensive sectors" going forward.

There may also be near-term upsides for SPH amid the Covid-19 outbreak.

"On the media side, increased health advisory advertisements from Covid-19 in the local newspapers could help to provide some temporary relief to the decline in SPH's media business," Mr Teng and Mr Cheong said.