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SPH upside from REIT announcement likely limited: Citi

Singapore Press Holdings (T39.SG), is up 2.5% at $4.50 after announcing Monday that it has received approval from the Singapore stock exchange to list two of its shopping malls through a real-estate investment trust, in a deal that could raise about $1 billion.

Citigroup sees limited upside from the news as it believes "the market has already priced in prospects of this asset recycling exercise positively."

http://www.theedgesingapore.com/the-dail...-citi.html

And the party goes on!

The Straits Times
www.straitstimes.com
Published on May 29, 2013
SPH shares soar up to 4% on Reit plans
Impending IPO sees counter hit day's high of $4.56 before closing at $4.47

By Alvin Foo

SHARES of Singapore Press Holdings (SPH) surged as much as 4 per cent yesterday after it unveiled plans to inject its retail malls into a new billion-dollar real estate investment trust (Reit).

The counter hit a day-high of $4.56 before closing eight cents, or 1.8 per cent, higher at $4.47. This was its biggest one-day gain since April 3.

Analysts say the Reit will leave SPH with a potential acquisition chest of about $760 million, and could pave the way for further expansion into new media.

On Monday evening, SPH said that it had received listing eligibility approval from the Singapore Exchange for SPH Reit, and expects the initial public offering to take place as soon as early July.

SPH will sell Paragon and Clementi Mall to the Reit for $2.5 billion and $570.5 million respectively, with SPH set to retain a 70 per cent stake in the Reit post-listing.

SPH chief executive Alan Chan said on Monday that the new business will unlock and release capital from its retail properties back to the group.

This will allow SPH to explore new growth strategies across its investment property, media and other businesses, he added.

SPH Reit is being set up to invest in a portfolio of income-producing property, mainly retail, in the Asia-Pacific as well as real estate-related assets.

Analysts were quick to point out the group's acquisition potential, as the net cash proceeds from setting up the Reit will leave SPH with a sizeable monetary reserve for expansion.

Citi Research analyst Low Horng Han said: "Of interest to investors in the longer term would be the pipeline of growth initiatives (for example, mergers and acquisitions) (that) management could possibly embark on with the $757 million balance in cash proceeds."

Deutsche Bank analyst Wu Wei-Shi said: "We recognise proceeds from the property asset sale could allow SPH to expand its presence in new media, but note the relative difficulty of monetising such opportunities."

Analysts said the proposed special dividend of 18 cents a share, to be paid once the IPO is completed, will boost SPH's yield significantly.

DMG analyst Joshua Low said the special dividend amounts to about 75 per cent of SPH's payout for the previous financial year ended Aug 31, 2012, and implies a boosting of yield to 9.6 per cent for its current fiscal year.

The market experts also noted that SPH will continue to receive recurring management fees and dividends from SPH Reit after the spin-off.

Deutsche Bank's Ms Wu said: "We estimate SPH will be able to maintain an approximately 5 per cent ordinary dividend yield by raising its payout ratio and/or with the help of proceeds from the property asset divestment."

SPH Reit has an estimated yield of 5.3 per cent, based on its full-year pro forma distributable income of $115.9 million and a market cap of $2.2 billion, noted Morgan Stanley Research.

It added that retail Reits in Singapore currently trade at a yield of 5.1 per cent.

alfoo@sph.com.sg

Is there anymore catalyst now that its Reit IPO is confirmed? I view Paragon and, to a lesser extent, Clementi Mall as SPH crown jewels. The spinoff will surely have an impact on future profitability of SPH, even though it is still retaining a 70% stake post IPO. Its core printing and advertising businesses are struggling with declining readership and its other businesses and M&A have yet to show results. Can they therefore maintain their past dividends payment? Is SPH still a good-to-have in one portfolio?

The injection of Selatar Mall is another catalyst, but that won’t happen anytime soon.

Another catalyst is how SPH make use of the money raised from IPO. But with its past records of overpaying for something, I am not really optimistic about it.

I am thinking is it better to sell off SPH and invest in its Reit instead? But then again, if one is interested in retail & property businesses, I think CMA is a much better bet, thought its yield is low.

SPH shareholders vote 'yes' to REIT listing

Singapore Press Holdings (SPH) shareholders gave an emphatic green light on Tuesday for the media group to put its retail malls into a real estate investment trust (REIT), according to the online version of the Straits Times.

Shareholders voted overwhelmingly in favour of the proposed deal at an extraordinary general meeting, with 99.79% of those present and voting, in favour.

http://www.theedgesingapore.com/the-dail...-reit.html

Will this add any value to SPH?

Better if they just keep the income flow in the company 100%

SPH needs to improve its core business and not waste time doing things like REITs.

I don't think their profits will be impacted significantly. They are still holding on to a 70% stake in the REIT. The tax savings and recurring management fee and distributions should be sufficient to offset the earning loss. The wonderful thing is that they managed to walk away with a large cash hoard while maintaining their profits.

(Not Vested)

i think this "brilliant financial engineering". Alamak! i have sold all my SPH which happens to be my core holding b4 this FE. Should have kept some. Imagine only 30% of DPU to public & 70% to themselves + you pay them for management. Remind me of SMRT, etc....

I shall quote the chairman, Dr Lee Boon Yang.

"You can have the cake and eat it too"

(19-06-2013, 05:35 PM)Temperament Wrote: [ -> ]i think this "brilliant financial engineering". Alamak! i have sold all my SPH which happens to be my core holding b4 this FE. Should have kept some. Imagine only 30% of DPU to public & 70% to themselves + you pay them for management. Remind me of SMRT, etc....

I think you forgetting that they are 'selling' a 99-years leasehold on Paragon for over 2 billion.

If they can outdo Keppel Land when it come to this (ala what KeppelLand did for OFC), perhaps they may be hope that eventually the REIT manager aspect will become a core part of SPH. And why not, there are many other smaller industrial/office building owners maybe just waiting to also 'REIT' their properties.

(19-06-2013, 04:55 PM)Nick Wrote: [ -> ]I don't think their profits will be impacted significantly. They are still holding on to a 70% stake in the REIT. The tax savings and recurring management fee and distributions should be sufficient to offset the earning loss. The wonderful thing is that they managed to walk away with a large cash hoard while maintaining their profits.

(Not Vested)

I agree with Nick. Let's work out the maths...

Before the listing, rental income is $191 million, PBT of $100 million.

After the listing, assuming rental income remains the same i.e. $191 million. The estimated expenses are
- Property expense of -$48 million
- Property manager fee of -$6 million
- Finance cost of -17 million (amortizing base 900 million debt with similar SPH's average interest rate)
- REIT manager fee of -$21 million

So, the distributor income is estimated as $100 million. SPH's 70% share is $70 million. Additional fees income (from both property and REIT fee) is $27 million, so total $97 million.

$97 million (post listing) versus $100 million (pre-listing PBT)