Singapore Press Holdings (SPH), the sponsor and major unitholder of SPH REIT, announced it is undergoing a strategic review to consider options for its various businesses. Credit Suisse has been appointed financial advisor.
“While SPH’s Media business continues to face a challenging operating environment and outlook, the Board of Directors believes that SPH remains undervalued and the objective of the strategic review is to unlock and maximise long term shareholder value,” the March 30 announcement said.
The quickest way for SPH to unlock value is to list its second REIT which comprises $1.4 billion of purpose-built student accommodation (PBSA) in the UK. The portfolio was headed for an IPO last year but was derailed by Covid-19, according to investment bankers.
SPH’s book value is around $2, with most of the value from SPH REIT, its two right of first refusal (ROFR) retail malls for SPH REIT, its PBSA, The Woodleigh and properties used for its media business.
Of the ROFR properties, The Seletar Mall which opened in 2014 has maintained high occupancy; the second ROFR, The Woodleigh Mall is currently under construction.
The carrying value of the media business was $180 million, accounted for by News Centre and Print Centre’s latest property valuation. Highlighting this in its March 30 report, UOB Kay Hian asks the question “potential transaction for the media business?”
In the SPH announcement on Mar 30, the company pointed out that no single entity can hold more than 5% of SPH because of the Newspaper and Printing Presses Act. In fact, SPH has dual-class shares, where management shares owned by Great Eastern Holdings carry more voting rights than all the ordinary shares in issue.
CGS-CIMB says SPH’s media business continued to see a structural decline. “In SPH’s 1HFY2021 for the six months to Feb 28, 2021, revenue fell 24% y-o-y to $61 million, led by a 29% y-o-y decline in newspaper print ad revenue and absence of revenue from Buzz which was divested in Jul 2020. Profit before tax (PBT) was $3.1 million but if excluding the job support scheme (JSS) grant income of $12.8 million, the media segment would have reported a PBT loss of $9.7 million,” CGS CIMB says.
While restructuring the media business could take time, more immediately, SPH has the opportunity to recycle The Seletar Mall into SPH REIT — given the latter’s recovery from Covid — and to list its PBSA now that occupancy levels are likely to rebound for the UK’s autumn term, on the back of its vaccination programme.
CGS-CIMB has a target price of $2.09, based on a 20% discount to its revalued NAV of $2.61.
