The Straits Times
www.straitstimes.com
Published on Mar 12, 2013
COMPANIES
SPH stock surges on Reit news
Move could unlock value, boost reputation as a retail mall player
By Alvin Foo
SINGAPORE Press Holdings (SPH) shares surged to their highest levels in nearly five years yesterday after the group said on Sunday that it is exploring setting up a Singapore-listed real estate investment trust (Reit).
The blue-chip counter soared 14 cents, or 3.4 per cent, to $4.31 for its best finish since June 2008.
Analysts said the potential Reit creation could unlock further value for shareholders and boost SPH's reputation as an influential retail mall player here.
OCBC Investment Research analyst Eli Lee said: "If this transaction does occur, we see it to be a favourable move which would unlock additional value from its mall assets... and recycle capital back into the group's growing retail mall business."
The SPH news comes just days after the red-hot $1.7 billion public listing of Mapletree Greater China Commercial Trust - the largest Reit ever launched here.
It was 29.5 times subscribed in total, and surged as much as 12 per cent on its trading debut last Thursday.
The latest Mapletree Reit added another 1.5 cents yesterday to $1.065, and is now nearly 15 per cent above its initial public offer price of 93 cents. It also follows media reports late last month of Overseas Union Enterprise (OUE) planning a $1 billion listing of its Singapore hospitality assets via a Reit as early as the third quarter.
DBS Vickers analyst Andy Sim said: "Investor demand has been quite robust for Reits of late."
Reits have been popular with investors in recent years, as they are seen as a good hedge against high inflation amid low bank deposit interest rates. Moreover, Singapore's Reit sector was the best-performing globally last year and is also tipped to shine this year.
Singapore Reits have also outperformed their regional peers in Hong Kong, Japan and Australia, according to a recent Singapore Exchange My Gateway report.
Analysts say spinning off a company's assets into a Reit allows it to raise funds, which can then be deployed to look for growth opportunities. Having a Reit also allows the company to earn regular income from the recurring fees of managing the malls, and gives it a lower tax bill.
Maybank Kim Eng analyst Ong Kian Lin said: "If the hospitality Reit comes to fruition, OUE also stands to benefit from the recurring fees as the Reit manager and tax savings in millions from the tax-exemption granted to a Reit."
Analysts say SPH's Reit listing would likely comprise its key property asset Paragon shopping mall, which was valued at $2.43 billion as of last August.
SPH has a 60 per cent stake in The Clementi Mall. It also has a 70 per cent share of Seletar Mall, which is slated for completion by the end of next year. A retail Reit comprising Paragon and The Clementi Mall would have assets worth about $3 billion, analysts estimate.
That could still be worth listing as a Reit, given the multi-billion dollar value of Paragon, which will underpin the trust, they add.
DBS Vickers' Mr Sim said: "It doesn't mean that with two, three assets it can't do it."
SPH could also find a partner for the Reit, or offer a higher yield for the Reit to attract investors, he added.
The potential move could even boost SPH's share price by showing that it has another area of growth. OCBC's Mr Lee said that this would position the group as "a growing retail mall player, whose expansion is supported by a cash-rich balance sheet and newspaper cash cow business".
alfoo@sph.com.sg
