SINGAPORE (June 29): With data centres an increasingly lucrative proposition for businesses with the rapid digitalisation of the global economy, Singapore Press Holdings (SPH) is looking to get a slice of the data centre business in a joint venture with Keppel Data Centres Holdings (KDCH) as it continues on its quest to replace lost earnings from its flagging print business.
The publishing company today announced that Times Properties, its wholly-owned subsidiary with TPM Pte Ltd, has entered into a shareholders’ agreement with KDCH, and its wholly-owned subsidiaries, Keppel Griffin and Geras DC, to incorporate a joint venture company (JVCo) to acquire the whole of Lot 6205N of Mukim 24 at 82 Genting Lane.
The JVCo, named Memphis 1 Private Limited, has an issued and paid up share capital of $100. KDCH owns a 60% stake in the new venture while Times Properties is the junior partner with 40%. Following its incorporation, Memphis 1 will be an associated company of SPH.
Memphis 1, which was incorporated today, has separately entered into a put and call option agreement with Singapore News and Publications Limited, a wholly-owned subsidiary of SPH.
The agreement was made in relation to the sale and purchase of the Singapore News and Publications’ leasehold interest in Lot 6205N.
Under the put and call option agreement, Memphis 1 has been granted an option to purchase the lot as well as the entire building from Singapore News and Publications Limited.
The property sale is set to be completed on July 17, with Times Properties disposing of a 60% effective interest in the property. Proceeds arising from the disposal of this effective interest represents an excess of $25.5 million over book value, with effective value interest being $30 million with a net gain of $24.4 million.
In its joint venture announcement, Times Properties justifies the new venture on the grounds of strong secular trend towards digitalisation and cloud computing, driving strong demand for hyperscale data centres. KDCH, it believes, is a seasoned industry player with proven expertise in establishing and operating data centres. With the new venture, management is confident of improving return on capital of its existing Mukim 24 building and yielding stable recurring income to strengthen the group’s earnings.
KDCH Investors and Times Properties will subscribe to an aggregate of 3,488,889 shares in the new venture. SPH Investor will possess 1,395,556 shares at a value of $1 each. Both companies will procure nominees to subscribe for $57,500,000 in aggregate principal amount of bonds, with the aggregate bond subscription amount standing at $23 million. SPH will contribute funds to the venture up to a contribution cap of $139,555,556.
Following this transaction, SPH’s Net Tangible Asset (NTA) per share is expected to rise from $2.08 to $2.09, yielding a rise in aggregate NTA from $3.347 billion to $3.372 billion. Earnings per share is seen to rise from $0.13 to $0.15, yielding a profit after taxation of $240.7 million as compared to $213.2 million before.
In terms of director interest, Dr Lee Boon Yang is chairman of the board of directors for both Keppel Corporation -- the parent company of KDCH -- as well as SPH, with no other directors having an interest in the transaction. Dr Lee has recused himself from any decisions associated with the joint venture.
As of the end of the trading day, SPH came in 0.01 points down at $1.29 with a 5.43% dividend yield. Price-to-earnings (P/E) ratio stands at 10.02.
