Singapore Press Holdings - CIMB Research 2017-06-15: In Pressing Need For Diversification

Singapore Press Holdings - CIMB Research 2017-06-15: In Pressing Need For Diversification SINGAPORE PRESS HLDGS LTD T39.SI

Singapore Press Holdings - In Pressing Need For Diversification

  • SPH-Kajima JV was the highest bidder for the first Bidadari mixed development.
  • S$1,181 psf bid comes with the advantages of first-mover status and prime location.
  • We are positive on SPH’s continual efforts to diversify earnings. 
  • Maintain Hold with unchanged FY8/17F-19F forecasts and target price.

Top bid in first Bidadari mixed development

  • The first Bidadari mixed commercial and residential site drew strong interest from developers, with a total of 12 bids submitted. The SPH-Kajima Development 50/50 joint venture submitted the highest bid of S$1.132bn, 1.1% above the second-highest bid of S$1.12bn.
  • Situated next to the current Woodleigh MRT station, this 273k sq ft land area has a 99- year lease tenure and maximum GFA of 958k sq ft, which could yield about 825 private homes according to tender details. Up to 161k sq ft area must be set aside for retail use, and another 88k sq ft for a neighbourhood police centre and community club, aligning itself with Bidadari estate’s vision of a “community in a garden”.

Bullish land deal?

  • At land cost of S$1,181 psf, we estimate the breakeven cost for the project at close to S$1,600 psf. We assume an ASP of S$1,700 psf, which is at a premium to the closest development (Forest Woods)’s ASP of S$1,400-1,450 psf, to factor in its strategic location and expectations for the future development of Bidadari.
  • The total gross development value (GDV) for this site is estimated to be S$1.69bn, which works out to project pre-tax return of 6-10%, assuming total project costs of S$1.59bn.
  • We note that historical developers’ land bids include Botanique@ Bartley’s S$648 psf per plot ratio (psf ppr) in Jan 2014 and The Poiz Residences’ S$775 psf ppr in Aug 2014.

Finally, another property project in the making

  • Since SPH won the lease of Seletar Mall in Aug 2012 with United Engineers, it has endured a drought of property project wins, owing to the competitive environment. This would be SPH’s first mixed commercial development and fourth retail mall, upon successful award.
  • SPH has a proven track record in building malls (Clementi Mall and Seletar Mall) in downtown neighbourhoods and residential projects (Sky@Eleven). In our view, this mixed-use development is well-positioned, with a wide catchment of future residents for potential retailers. 
  • We also think this could boost property earnings’ contribution in the medium term.

Hold rating unchanged

  • We think this land acquisition is likely to be funded by bank borrowings and internal resources, as SPH had a low net gearing ratio of 25.8% at end 2QFY8/17. We keep our FY17-19F EPS and DPS forecasts unchanged.
  • Maintain Hold with SOP-based target price of S$3.36. 
  • Downside risk stems from deteriorating media conditions, while special dividends from M1 stake divestment and injection of Seletar Mall into SPH REIT could pose upside risks to our Hold call.

NGOH Yi Sin CIMB Research | http://research.itradecimb.com/ 2017-06-15
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 3.360 Same 3.360