SPH - DBS Research 2021-08-03: A New Chapter Awaits

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SINGAPORE PRESS HLDGS LTD (SGX:T39)

SPH - A New Chapter Awaits

• Attractive take-over offer by Keppel Corp.
• Share consideration in SPH REIT and Keppel REIT makes up around two-thirds of total consideration.
• Investors can monetise and trade up for stakes in key REITs within enlarged group while enjoying property income stability that they would have grown accustomed to.
• Recommend to ACCEPT OFFER.

Investment Thesis:

• Recommend to ACCEPT OFFER; attractive privatisation offer by Keppel Corporation at a 1.0x price-to-book. Proposed privatisation by Keppel Corporation will give shareholders an opportunity to monetise stakes in the non-media business post the sell-off of SPH’s media business. SPH shareholders are proposed to receive S$0.668 in cash, 0.596 units in Keppel REIT shares, and 0.782 units in SPH REIT shares, to add up to a total consideration of S$2.099 / share (upside of 12% from last price).
• Trading up for stakes in key REITs within enlarged group. The non-property segment post divestment of the media business is estimated to make up just 15% of SPH group’s total valuation, and investors would have likely grown accustomed to the stability of the property rental income stream. The offer grants unitholders a chance to trade up for stakes in SPH REIT and Keppel REIT, both of which are supported by growing yields of 2- 4% y-o-y going into FY22. SPH REIT holds assets that existing unitholders should be familiar with, while Keppel REIT allows for diversification into the office asset class with overlaps in the same key markets of Singapore and Australia.
• Accept the offer. We recommend SPH unitholders to accept the offer that is priced attractively at 1.0x price-to-book. The integration of SPH into the larger Keppel Corporation umbrella points towards a possible combination that offers size, scale, and synergy.

Valuation

• SPH’s portfolio valuation excluding the existing media business is approximately S$8.9bn, of which ~85% is attributable to the real estate segment(s). We raised our target price, pegged to Keppel Corporation’s privatisation offer.
• See
  • SPH's Share Price,
  • SPH's Target Price,
  • SPH's Analyst Reports,
  • SPH's Dividend History,
  • SPH's Announcements,
  • SPH's Latest News.

Where we Differ

• Our FY21F earnings is below consensus, reflecting operating profit largely from the property segment.

Key Risks to Our View

• Restructuring road block. Should the privatisation offer not be accepted, there remains risk of further widening of losses from the media business come FY22.

Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2021-08-03

SGX Stock Analyst Report ACCEPT OFFER MAINTAIN HOLD 2.10 UP 1.090