Singapore Press Holdings (SPH)

They could form a JV with another fund owning retail assets and co-manage the REIT - CWT joined ARA, Freightlinks joined Blackwood etc. Alternatively, the branding of SPH alone should be sufficient to wet prospective investors appetite in this yield hungry environment.

SPH's stake in Clementi Maill is 60%. I guess there will be more layers to go through for the reit manager on tenant mix, loan matters etc, if CM is to be included in the reit. To have complete control, one possibility is to buy over the other 40% stake.

The SGX announcement has thrown SPH into a bullish frenzy. It is already up 3.4% at $4.31 now.

As Warren Buffett is cautious when others are greedy, are the buyers greedy or fundamentally smart?

(11-03-2013, 08:24 AM)wsreader Wrote: SPH's stake in Clementi Maill is 60%. I guess there will be more layers to go through for the reit manager on tenant mix, loan matters etc, if CM is to be included in the reit. To have complete control, one possibility is to buy over the other 40% stake.

I believe all property will go into the REIT except the Seletar Mall, which may be injected into REIT at later phase.

SPH's 60% stake in Clementi Mall will not be an obstacle to REIT manager IMO.

Agreed. The Reit injected is likely to include Paragon (valued at S$2.4b) and Clementi Mall (valued at S$0.6b owned by SPH and its co-investors). The bonus is other mall owners injecting their malls together with SPH (more work for SPH to source for them). Without this, SPH is able to list a REIT with Paragon and Clementi Mall.

This will give SPH REIT the financial muscle to acquire more retail space.

I wish they issue these SPH REIT units to existing shareholders too.

I dun quite understand why the market is giving this deal such a thumb up. Yes, they will get a lot of cash from this, but since their dividend payout is almost 100% of earning recently, spinning this 2 property off, wouldn't that result in lower recurring income and put the payout at risk?? Or investors are holding out for a special one off payout to return the cash? I doubt they can effective use the cash to expand their media business. Then are they using the cash to buy more property to sell to the reits?

(11-03-2013, 12:56 PM)Greenrookie Wrote: I dun quite understand why the market is giving this deal such a thumb up. Yes, they will get a lot of cash from this, but since their dividend payout is almost 100% of earning recently, spinning this 2 property off, wouldn't that result in lower recurring income and put the payout at risk?? Or investors are holding out for a special one off payout to return the cash? I doubt they can effective use the cash to expand their media business. Then are they using the cash to buy more property to sell to the reits?

I tent to agree with your view.

The announcement might be just a compliance to Rule 703, rather a hint on the outcome.

(11-03-2013, 12:56 PM)Greenrookie Wrote: I dun quite understand why the market is giving this deal such a thumb up. Yes, they will get a lot of cash from this, but since their dividend payout is almost 100% of earning recently, spinning this 2 property off, wouldn't that result in lower recurring income and put the payout at risk?? Or investors are holding out for a special one off payout to return the cash? I doubt they can effective use the cash to expand their media business. Then are they using the cash to buy more property to sell to the reits?

Financial Engineering .......

You are assuming that they are selling everything away for cash.
They may keep a big portion of shares in this REIT, load it with low interest rate debt to increase the yield and sell some shares to public.
So, in the end, they collect some cash and yearly dividend from the REIT.

And, next time, when they want to bid for another mall, can ask all shareholders to chip in.

(11-03-2013, 05:22 PM)yeokiwi Wrote:

(11-03-2013, 12:56 PM)Greenrookie Wrote: I dun quite understand why the market is giving this deal such a thumb up. Yes, they will get a lot of cash from this, but since their dividend payout is almost 100% of earning recently, spinning this 2 property off, wouldn't that result in lower recurring income and put the payout at risk?? Or investors are holding out for a special one off payout to return the cash? I doubt they can effective use the cash to expand their media business. Then are they using the cash to buy more property to sell to the reits?

Financial Engineering .......

You are assuming that they are selling everything away for cash.
They may keep a big portion of shares in this REIT, load it with low interest rate debt to increase the yield and sell some shares to public.
So, in the end, they collect some cash and yearly dividend from the REIT.

And, next time, when they want to bid for another mall, can ask all shareholders to chip in.

SPH doesn't need cash at the moment, there is no reason to raise cash via the spin-off.

Up to last FY2012, the cash reserve is amounted to S$372.5 mil, and investible fund (both LT and ST) is S$790 mil.

Most of the debt is investment property related.

I don't really see the reason for raising cash. The only valid reason is capital reduction to shareholders, but doesn't seem a good time to do so.

(11-03-2013, 05:22 PM)yeokiwi Wrote:

(11-03-2013, 12:56 PM)Greenrookie Wrote: I dun quite understand why the market is giving this deal such a thumb up. Yes, they will get a lot of cash from this, but since their dividend payout is almost 100% of earning recently, spinning this 2 property off, wouldn't that result in lower recurring income and put the payout at risk?? Or investors are holding out for a special one off payout to return the cash? I doubt they can effective use the cash to expand their media business. Then are they using the cash to buy more property to sell to the reits?

Financial Engineering .......

You are assuming that they are selling everything away for cash.
They may keep a big portion of shares in this REIT, load it with low interest rate debt to increase the yield and sell some shares to public.
So, in the end, they collect some cash and yearly dividend from the REIT.

And, next time, when they want to bid for another mall, can ask all shareholders to chip in.

I don't quite see the relationship with the Popular Hldgs post, so I'm not including the quote here...

In addition, any excess Profits from selling the 2 Malls assets to the REIT can be used to bid aggressively (their usual bidding history) for more Malls / sites. After completing and incubating or AEI, they can offer it to the new REIT via ROFR. If taken up, more profits...

Further, as the REIT Mgr, they'll have another source of income. Besides the regular Mgmt Income, also Acquisitions, Disposal,... Income.

So, not a bad idea, right? See how Capitaland had been doing the above for many of their assets - CMT, CCT, CRCT, AscottREIT. Should be a tried and trusted model by now as many other listed cos. have gone down the same path ie. Freight Links (Sabana), CWT (CLT + Cambridge which they'd divested), FEO (FE-HTrust), CDL (CDL HTrust), KepLand (KepREIT), Parkway (now IHH) (PLife),...

In spite of the above, I have decided to take profit for my last lots of SPH....