Singapore Press Holdings - OCBC Investment 2017-06-22: Awarded Bidadari Mixed Site

Singapore Press Holdings - OCBC Investment 2017-06-22: Awarded Bidadari Mixed Site SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings - Awarded Bidadari Mixed Site

  • Awarded mixed Bidadari site.
  • Bullish bid but likely accretive.
  • Selling overdone; upgrade to HOLD.

Awarded Bidadari mixed site in HDB tender 

  • SPH announced yesterday that, together with its JV partner Kajima Development Pte Ltd (Kajima), its consortium has been awarded for S$1.132b (or S$1,181 psf ppr) the HDB tender for a 99Y leasehold site at Upper Serangoon Rd. 
  • The mixed commercial and residential site has a land area of c.25.4k sqm (with a max GFA of 958.5k sq ft) and the consortium plans to develop over 600 homes with a 310k sq ft commercial component.
  • The site is part of the Bidadari Estate and the tender conditions state that, as part of the development the consortium has to build a 6k sqm community center, a 2.19k sqm neighbourhood police center as well as a commercial bridge towards Bidadari Park and an underpass to connect to the bus interchange.

Upgrade to HOLD on valuation grounds 

  • While the consortium’s bid was deemed to be bullish by the market, we note that its bid was only 1.1% higher than the second highest bidder and believe the project will likely be accretive, particularly given improved sentiments in the domestic residential sector. 
  • We like that SPH is expanding its suburban mall portfolio now that Seletar Mall is nearing stabilization. 
  • With its strong balance sheet and low 26% net gearing, the group has ample capital headroom for a green-field development. With this acquisition, we also see a higher chance that Seletar Mall will be divested over the nearer term as the group recycles capital from a stabilized development to a green-field project. 
  • Given the uncertain economic outlook and the continuing disruption of the media industry, we expect conditions to remain challenging for the group’s media business. We update our model with the latest acquisition and weaker media assumptions and our fair value estimate slips further to S$3.34.
  • That said, since we have downgraded our rating to SELL on July 18 last year, SPH's share price has declined 19% and we see the correction to be overdone. Upgrade to HOLD on valuation grounds.

Note: OCBC investment had upgraded SPH to HOLD in the previous note dated 26-Apr-2017. (Singapore Press Holdings - OCBC Investment 2017-04-26: Entry Into Healthcare Sector

Carmen Lee CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-06-22
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 3.34 Down 3.410