SPH has announced that it will join Keppel Corporation Limited (KCL) in making a preconditional voluntary general offer for all outstanding shares of M1 Limited (M1) at a price of S$2.06 per share in cash. SPH has undertaken to roll-over its existing 13.45% stake in M1 into Konnectivity Pte. Ltd. (Offeror), which is majority-held by KCL.

Upon the close of the offer, SPH’s effective stake in M1 may increase to a maximum of 16.13%. We note that approval from the IMDA is a pre-condition to making this offer.

As we understand, SPH would be looking to leverage M1’s mobile platform to offer on demand and ready digital content. Nonetheless, we note that the anticipated transformation (contingent upon a successful general offer) could see dividends from M1 being affected, not only because of the competitive landscape, but also due to the allocation of resources as part of the transformation efforts.

We maintain our estimates, HOLD rating and fair value of S$2.52 for now.

Source: OCBC Research - 28 Sept 2018