Analysts Just Published A Bright New Outlook For SPH REIT's (SGX:SK6U)

SPH REIT (SGX:SK6U) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance.

Following the upgrade, the most recent consensus for SPH REIT from its five analysts is for revenues of S$320m in 2022 which, if met, would be a notable 15% increase on its sales over the past 12 months. Statutory earnings per share are forecast to be S$0.064, approximately in line with the last 12 months. Prior to this update, the analysts had been forecasting revenues of S$281m and earnings per share (EPS) of S$0.052 in 2022. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.

Our analysis indicates that SK6U is potentially undervalued!

Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of S$0.95, suggesting that the forecast performance does not have a long term impact on the company's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on SPH REIT, with the most bullish analyst valuing it at S$1.02 and the most bearish at S$0.93 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting SPH REIT is an easy business to forecast or the underlying assumptions are obvious.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting SPH REIT's growth to accelerate, with the forecast 32% annualised growth to the end of 2022 ranking favourably alongside historical growth of 6.3% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.6% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect SPH REIT to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at SPH REIT.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for SPH REIT going out to 2024, and you can see them free on our platform here..

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.