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Investor CentralSingapore Press Holdings Limited - MANAGEMENT REPLY: What does it need the cash for?
25/3/2013 – Singapore Press Holdings (SPH) is looking into setting up a Real Estate Investment Trust (REIT) to list its property assets on the mainboard of Singapore Exchange.
However, it did not give specifics on timing, size of IPO or assets to be listed.
It says it is still reviewing the properties that might form the REIT portfolio and the terms at which they might be injected into the REIT.
However, it only owns three: a 100% stake in the Paragon Shopping Centre on Orchard Road, a 60% stake in Clementi Mall, and a 70% stake in Seletar Mall which is currently under development and slated for opening in 2014.
The Paragon and Clementi are valued at S$1.75 bln on SPH’s books versus market value of S$3.03 bln.
Therefore the upside in gross asset value realization is S$1.3 bln.
Brokers have upgraded the stock to a BUY for potential divestment of assets into a REIT.
OCBC Research thinks the fair value of SPH is S$4.94 and DBS Vickers Research believes it to be S$4.79.
Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.
1. What does it need the cash for?
Property owners usually list a REIT because they want to extract some of the capital they have invested in property.
It's a trade-off: by selling a part of the REIT to other investors, they free up cash to spend on other things.
SPH has benefited greatly from its properties, which contributed only 15% of Q1 revenue but 21.7% of Q1 profit.
Which begs the question: what does it need the cash for?
2. How much stake will SPH maintain in the REIT?
Assuming SPH retains a 51% stake in the REIT, OCBC Research estimates potential divestment gains of S$625 mln to S$744 mln, which works out to 39 cents to 46 cents per share.
3. Will it declare a special dividend?
With such a significant payday, brokers are expecting a special dividend and/or a distribution in specie of REIT units to shareholders.
Therefore, can we expect the same?
Or will the cash be "recycled" into other property developments?
And therefore…
4. Will SPH become a property company?
We've wondered this for many years, given the strength in property compared to its sluggish traditional publishing business.
Management reply: For now, we have nothing more to say on this beyond our latest announcement. We will release more details when the time comes. Thanks for your interest.
We thank management for its responses.
Sources & further information
Statutory disclosure
OCBC Research report
DBS Vickers Research report
©2013 Investor Central® - a service of Hong Bao Media
