Wednesday, 31 March 2021

Singapore Press Holdings Potential Corporate Restructuring- Possible Scenarios And Outcomes.

Singapore Press Holdings Limited (“SPH”) announces on 30 March 2021 that it is undergoing a strategic review to consider options for its various businesses as it believes firmly that it is undervalued by the market. Credit Suisse (Singapore) Limited had been appointed as its financial advisor for this purpose. This is coming straight on the heel of Capitaland. 

Scenario 1: SPH execute a same manoeuvre as Capitaland?
So will SPH also do a segregation of its property development business in Woodleigh Residences and shopping mall from its property management business of REITs and Student Accommodation, just like CapitaLand (please see my previous post)? I think not likely as the property development is a relatively small division out of the entire businesses of SPH. In addition, personally, I think shareholders will most likely laugh at the management team for being a copycat. 

Scenario 2: SPH privatize its loss making media segment and list property businesses out of altruism to shareholders
I think the best way with the highest probability of certainty in unlocking value straight away is to privatize the media business and just spin off the property arm into a new listed company call "Singapore Property Holdings". In this way, they can still retain the use of the acronym SPH. Also, for the media segment, they can choose to either (i) get government funding (since this is as good as a public good which the Singapore government will not allow shutdown despite long running mounting losses and it simply defies commercial logic) or (ii) learn from Australia and implement laws to force Facebook and Google to pay for the news from the old SPH. 

Scenario 3: Spinning off Seletar Mall into SPH REIT to unlock value in SPH
Anyway, I think the most likely outcome of the strategic review will not be something as big and drastic as what I had mentioned above. SPH will also not be able to do a public listing of its student accommodation business into a REIT as it just started some new acquisition here and needs to build up its stability. I think the most likely outcome is at most the spinning off of its suburban Seletar shopping mall into the portfolio of SPH REIT. A better bet would be to acquire more SPH REIT. Seletar shopping mall is coming off a bad year due to COVID's impact and its valuation would be lowered in the event SPH choose to sell off Seletar Mall. SPH on the other hand is still hanging on to its loss making media segment which is obviously its Achilles' heel dragging down its market pricing.

Parting thoughts:
SPH REIT share prices has been on an uptrend recently. I reckon many other investors have also foresee the possibility of the overdue spinning off of a mature asset of Seletar Mall to unlock value in SPH. Interesting move by SPH Senior Management team. I actually pray for something bigger than the selling off of Seletar Mall such as privatizing the loss making media segment and just listing the property businesses which is the real essence of the current SPH. Let's call a spade a spade.

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