Singapore Press Holdings (SPH) announced on Monday evening that it has plans to list its retail properties in July to raise S$1bil. If the listing were to go through, the company said that it will payout a special dividend of S$0.18 per share to shareholders. When the stock market opened on Tuesday, SPH gapped up 3.6% to commence trading at S$4.55.

Shortly after the open on Tuesday, Macquarie Equities Research (MER) released a research note with a 12-month target of S$4.33 and a ‘Neutral’ rating. This is 3.1% below SPH’s closing price of $4.47 on Tuesday.

Impact
Listing 2 properties - Paragon and Clementi - at equity value of S$2.2bn: SPH will inject the assets into the REIT for around S$3.1bn, which will also bear a debt of around S$900m. Paragon has been valued at S$2.5bn while Clementi mall has been valued at S$570m.

Targeting S$540m IPO and retain 70% stake in the REIT: The sale of these 2 malls to the REIT will raise around S$1bn for SPH.

Will return 18 cents/sh special dividend to shareholders: SPH plans to use S$291m for a special dividend and the rest of the cash of around S$750m will be used for working capital and growth opportunities across property, media and other businesses, according to management.

Listing its 2 properties at 1.5x P/B: The book value of Paragon and Clementi on SPH's balance sheet is S$1.5bn, which implies that SPH will list the properties at 1.5x P/B, a decent outcome in MER’s view.

Third mall - Sengkang - will be injected into the REIT when completed: The 3rd mall in Seletar will start operating by 2015, which is when the property might get injected into the REIT, in MER’s view. SPH holds a 70% stake in the Sengkang mall. 

Action and recommendation
SPH will make a divestment gain of around 45 cents/share from this listing out of which it is giving out 18 cents to shareholders: MER’s analysis suggests SPH will make a divestment income of S$737m from this transaction, out of which S$291m will be given out as a special dividend.

Focus will turn to core media business post this IPO, which remains pretty weak: Last 2 quarterly results have suggested an increasing pressure on the print media business. Once the focus is back on the core business, MER thinks that the stock will struggle to increase from current levels.

Source: Macquarie Research - 29 May 2013