Another Competing Offer for Singapore Press Holdings- S$2.10 PAID FULLY In CASH And Points To Note By Shareholders

Wow, I was shocked by the sudden trading halt and new announcement made by Singapore Press Holdings ("SPH") today.  Cuscaden (Consortium made up of Capitaland, Mapletree and Ong Beng Seng) announced that it has on 28 October 2021 submitted to the board of directors of SPH (the "Board") a proposal to acquire (the "Proposed Acquisition") all the issued and paid-up ordinary shares in the capital of SPH! What is even better, Cuscaden further announced that its offer of S$2.10 per share, will be paid for all in hard cash. Breaking news indeed! With the new all-cash offer on hand, I expect the share price of SPH to shoot up immediately from S$1.99 per share to at least S$2.10 per share. 

Extract of proposed offer S$2.10 all in hard cash

1.Dream come true!

Back in my previous 8th August 2021 posting, I have mentioned that shareholders need to get rid of the loss making Media segments first which will open up doors to other competing offers. Happy that the new competing offer materialize. Guess shareholders like myself do not need to take up Keppel Corp's offer of part cash along with Keppel Office REIT and SPH REIT as consideration. Getting units in odd lot as well as Keppel Office REIT are actually something that I do not want. 

Extract of previous posting on 8th August 2021

2.Safer deal for SPH shareholders- superiority to Keppel Corp's offer

The good thing about the Cuscaden deal is not just the all cash offer. The other added advantage is that the new scheme of offer will not be subject to any further shareholders' approval on the part of Cuscaden and its consortium members unlike the one from Keppel Corp.

3. Will Keppel Corp revised its offer price?

With the competing offer, there is a chance that Keppel Corp might revise its offer. Even if it did not win the acquisition, Keppel Corp will walk away with a break fees of S$34Mil from SPH. So it is a win-win situation for Keppel Corp.

4. Parting thoughts and points to take note by existing shareholders

Well, I am extremely excited by the new offer. Let's see whether there will be a bidding war between Keppel Corp and Cuscaden. Existing shareholders should not just sell off their shares immediately upon lifting of the trading halt. Please wait for the dividend ex-date of 22 November 2021 to pocket the S$0.03 dividends per share also. The S$2.10 offer will still be waiting there for picking up by shareholders. Of course, if the market price reaches S$2.13 before ex-dividend date, shareholders can consider selling off immediately. However, it maybe wise to hold first to see whether there are better counter-offer from Keppel Corp. Even better, there maybe another consortium or equity fund coming in with a 3rd bid. 

Note:

Please also refer to my previous post- "The Keppel Corp and SPH Deal That You Need to Be Careful On- NOT Done Deal Yet."

Mapletree Industrial Trust Distribution Yield Hits 5%- Excellent Q2 FY21/22 Results With Completion of US Data Centres Acquisition

Mapletree Industrial Trust ("MIT") announced another quarter of splendid results. Its Q2 Gross Revenue increased by a whopping +50.5% year-on-year with a +47.4% corresponding in net property income. Most importantly, its quarterly distribution increased by +11.99%. At the market price of S$2.75 per unit, its annualised forward distribution yield thus hits 5.05% per annum. 

Summary of Q2 and 1st Half FY2021/2022 results

Zoom in on Q2 Quarterly YoY results

The stellar performance of MIT is mainly driven by contributions from the completion of US$1.32 billion acquisition of 29 data centres in the United States of America on 22 July 2021. I am happy to see the gradual transformation of MIT into a more data centres centric REIT. Its overall WALE also increased from 3.7 to 4.3 years.  

MIT hits 5.05% distribution yield

MIT's market price over NAV per unit of 1.54 times-so much better than Keppel DC REIT's 2.0 times

Parting thoughts:

Well, the strong performance of MIT lead me to have a tiny tinge of regret over my recent investments into Keppel Data Centre REIT instead of putting in more into MIT. Saying that, I already have a significant concentration of my overall combined portfolio in MIT. Its NAV of S$1.78 per unit (relative to mkt price ratio with Keppel DC REIT) and attractive distribution yield of 5.05% is enticing indeed. Just hope that interest rate does not run up too quickly (given that the US has been busy printing loads of money into its economy) and policy makers stay cool on inflation.

Raffles Education Corporation In Hell of A Mess- Oei Hong Leong Vs Chew Hua Seng

Since 29 July 2021, Raffles Education Corporation ("REC") has plunged by more than 62% from S$1.60 per share to S$0.061 per share as at 18th October 2021. For its financial statements ending 30 June 2021, its auditor BDO LLP has also recently expressed concern on whether Raffles Education can carry on its business as its current liabilities is now more than its current assets. Internally, Raffles Education also faced intense infighting between its 2 majors shareholders. In the latest fiasco, Mr Oei Hong Leong has raised a letter to the Board of Directors expressing his concern over a number of adult family members of Mr Chew Hua Seng working in REC and drawing high salaries. Share prices seems to have dropped further after the circularization of the letter in public.

1. Shocking super late disclosure of material news only months later on 29th July 2021

Mr Oei has also previously dropped a letter to ask Mr Chew on why material disclosure relating to a default of the Malaysian Affin bank loan of S$131Mil (RM$410Mil) was not made known to shareholders earlier.  

Apparently, writs and statements of claims has been filed in the High Court of Malaysia by Bank Affin on 27th May 2021 and this amount is more than half the market capitalisation of S$220Mil at that juncture but was never disclosed until 29th July 2021. 

2. This is not the first time Mr Oei Hong Leong went after Mr Chew Hua Seng
It was reported that Mr Oei and Mr Chew used to be good friends for about a decade, and went on holiday together with their wives on more than one occasion. However, their relationship soon soured and they became eternal rivals instead. 

The discord had already started in 2017 when Mr Oei claimed that Mr Chew had agreed to find a buyer to buy-out his stakes in REC. This led to a lawsuit by Mr Oei against Mr Chew. Mr Oei eventually lost the suit in Feb 2020. Subsequently, there were various attempts by Mr Oei to oust Mr Chew out of REC.

3. REC forced to sell off office and college campus at 51 Merchant Road to raise S$200Mil to boost current liquidity
In a bid to raise funds, REC has announced on 16th August 2021 that it intends to sell its current campus for S$200Mil and if possible arrange for a sales and leaseback. All potential buyers will be aware of the tight deadline that REC requires to raise cash to pay off short term debts which are due within a year. Not sure on whether it can get a good price considering the weak bargaining power REC has at this particular point in time. Well, I am not very optimistic on REC getting a good deal. 

Parting thoughts- "calculated risk" to buy into REC?

I have a friend who has decided to spend S$5K to buy into REC. He termed this as raiding the stocks for a speculative trade for quick profits and has invited me to join in additional purchases. For me, I will stay far far away from REC to wait for the dust to settle between the warring factions.

Updates as at 20 Oct 2021 3pm: 

On 19th Oct 2021 just after my posting, the CEO of REC requested for a trading halt pending release of an announcement. Currently, REC is still being suspended. It also turned out that Mr Oei had started selling off a significant chunk of his REC shares. Hopefully, trading suspension will be lifted soon else recent investors who invested have their funds stuck.

Dasin Retail Trust Bounced Back To Life with 22% Valuation Improvement- Will It Survive the Debt Crisis With Sino-Ocean Capital Taking Over As New Trust Manager?

Dasin Retail Trust ("Dasin") has been on a roller coaster ride since my last posting on 18 September 2021. When Dasin made a shocking announcement on 28th September 2021 that its half year distribution payment has been postponed to 4th October 2021 instead of 28 September 2021 itself, this sparked off a fierce selling frenzy by many unit-holders to get rid of their units fearing the worst had happened. The SGX regulator  immediately raised a query to ask Dasin to give more detailed clarifications with regard  to the actual reason for the delay. Price at one point dropped to  S$0.380 per unit from S$0.415 per unit.  Dasin's NAV as at half year reporting was S$1.46 per unit. It was totally disastrous as Dasin entered into one of its darkest chapters since its listing on SGX.  

1. Dasin Management team should have planned better for the half yearly distribution and not caused market panic

The false alarm started with Dasin management team being extremely secretive on the reason for the delay other than it was due to "technical issues" delay on 28 September 2021. The mind blogging term "technical issues" thus lead to widespread panic as investors feared that either Dasin has run out of cash or some bank facilities covenants has been breached which led to immediate default with bankers closing in. 

It was only after SGX regulator started querying before Dasin management came out to explain (on 1st October 2021) that the delay was due to COVID-19 measures that slowed down the verification work from a bank in Macau that was transferring funds back to Singapore.

2. Dasin bounced back with Sino-Ocean Group (listed on HKE) taking over as the new Trust Manager

On 12th October 2021, Dasin announced the successful completion of sales of shares of the Trust's manager from the Founder, Mr Zhang Zhencheng to Sino-Ocean. Sino-Ocean. Capital’s businesses include real estate investment, private equity investment, structured investment, strategic and innovative investment. It has clinched numerous awards such as “Top 10 Best Investment Institute (Real Estate Industry)”, “Top 10 Real Estate Fund Management Institute”, “Best Real Estate Equity Investment Institute”. As at the end of 2020, its assets under management exceeds RMB 133.2 billion.

With the financial backing and reputation of Sino-Ocean Group, the risk of non-renewal of offshore bank loans by the syndicated banks to Dasin has been significantly (albeit probability of non-renewal is still existent) reduced. As a result, Dasin roared back to life on 13th October 2021 with prices hitting intra-day high of S$0.580 per unit at one time. Its price has since gone down to S$0.470 per unit. Nevertheless, this is still an impressive 22% surge in market valuation within 3 weeks.  

3. Parting thoughts

The next step for the new Trust Manager, Sino-Ocean, would be to engage the bankers with regard to the final negotiation for the S$500Mil bank loans that are due for repayment by 19th December 2021 which lead to a current ratio of less than 1 for Dasin. If the long term banking facilities renewal hurdle is cleared, I reckon that there is a potential upside of 40%-50% increase in unit price back to S$0.70 per unit, which was the price before the sudden collapse from 16th June 2021 onwards due to the impending repayment date of the offshore borrowings expiring on 18th July 2021 at that juncture (it was eventually extended but only till 19th December 2021). Saying that, many investors are still scarred by the bad track record of previous S-chips listed on SGX. 

Note:

Please also see my previous post on 18 September 2021: "Will Dasin Retail Trust Go Bankrupt And Be Put On Fire Sales? Annualised Distribution Yield at 12.9%".

How Much Is Singapore Press Holdings Worth Now? Disappointing Final Dividend Declaration.

Singapore Press Holdings ("SPH") final results was extremely good if we exclude the worsening performance of its media segment. Anyway, Media segment will be history to SPH soon, as shareholders has voted overwhelmingly in September 2021 to spin it off into the new proposed "company limited by guarantee" model. The final dividend declared of 3 cents per share is extremely stingy and disappointing. I have thought that they would have sweeten the Keppel Corp deal for shareholders by giving extra special dividends to keep retail shareholders happy so as to support the takeover. 

Updated Keppel Corp's Offered Consideration

Since the offer was announced on 2 August 2021, Keppel REIT's price has dropped a lot which does impact the deal being offered to SPH shareholders. Let us start to do a little bit mental acrobatics using the most recent market price of SPH, Keppel REIT and SPH REIT as at 8th October 2021 (Friday):

1. First point to note is that as the probability of the deal being crystalized (in particularly with SPH Media successfully voted to be transferred out thus meeting the first condition of the offer) has more visibility overtime, the premium based on current SPH market price has gone down significantly relative to 2 August 2021. Initially, there was a 11.65% premium which has declined to +4.26% based on current market valuation of SPH at S$1.980.

2. Nevertheless, we have to be mindful that due to upcoming dividends being declared in both SPH and SPH REIT, this will skew the valuation exercise since ex-dividend will mean a drop in equity value later on. Hence we need to normalize the numbers to account for the upcoming drop in business fair valuation due to payout of dividends. The premium if one were to buy today is still very much worth it as there is a potential +5.23% upside once the deal is being completed.

3. With the local and international COVID-19 situation improving day by day, Keppel REIT and SPH REIT market value may also go up even more. This will increase the premium of the Keppel offer to SPH shareholders.   

Parting Thoughts

Assuming that one is holding on to 10,000 shares and at an entry price of S$1.980, there will still be an upside of 5.23% (S$1K) once the deal is being approved by SPH and Keppel Corp shareholders despite the ex-dividend effect. This will mean an overall +S$1.3K upside including entitled dividends (of course, if the deal is indeed approved).

Will SPH Release A Special Dividend To Reward Shareholders Before Voting On Keppel Corp's Acquisition Offer?

As per the SGX announcement by Singapore Press Holdings ("SPH"), it will release its year ending 31 August 2021 financial results on 5 October 2021 (Tuesday). Lusterless SPH share prices far from the offered price also suddenly went up a bit during the last 2 weeks. Maybe market in anticipation of a special and generous "dividend" before going into the AGM to vote for the Keppel Corp acquisition deal? Will SPH management give something extra to sweeten the upcoming deal?  

Investment Portfolios Updates- (1 Oct'21)- Added More Alibaba Group Holdings And Keppel DC REIT

1. Portfolio 1- CDP held stocks

I have sold off all my stocks in Global Investment Limited (except for the odd lot of 1 share) as it has gained over 30% in terms of capital return. While the share-buy back helps to increase its share price, I do not like it as its management seems to have run out of idea on what assets to invest in and the dividend yield has gone down drastically. I have used the proceeds to switch to Keppel DC REIT and also Mapletree North Asia Commercial Trust. 

Please also see: "Keppel DC REIT- Growth Story Intact And Supported By Visible Pipelines".

2. Portfolio 2- Margin purchased securities

I have invested into Keppel Pacific Oak REIT in view of the better performance among US office REITs and future growth potential. Manulife US REIT was extremely disappointing in terms of its recent results as well as too highly leveraged.

In addition, I have also taken up positions in SPH in early August 2021 as there is visibility of increase in its price by 10% upon completion of the Keppel Corp's offer. Given that Keppel Corp and SPH are all owned by government linked companies, I figured that probability of the deal going through is rather high with less risk. Even if the deal does not go through, I can live with holding on to SPH as its student accommodation business can be further monetized via a REIT offer. Woodleigh shopping mall and Seletar Mall can also be sold into SPH REIT.

Please also see Historic Moment for Singapore Press Holdings Group- Goodbye to Media and Press Business!

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here

While my main approach in investment is towards an income generation strategy as evident from my portfolio 1 and portfolio 2 above, I have also set aside some funds for capital growth. Hopefully, the returns from 1 of these will be multiple fold as a booster to my overall portfolio. 

For Alibaba, I have been adding on to it over the past few months- please see: "The Alibaba Fiasco- Catching A Falling Knife?"

As for Dasin Retail Trust, this is a high risk high reward counter. Basically, its current liability exceeded current assets as the bankers are not willing to renew the Trust's bank borrowings but only extend it till 19 December 2021. Its market price thus has dropped significantly to only S$0.410 per unit at the time of my purchase. My initial investment in this was S$5K as I was optimistic that its new Trust Manager being appointed is a China state owned enterprise listed on HKE and there is a huge potential to see a 100% return in investments by end of the year- please see: "Will Dasin Retail Trust Go Bankrupt And Be Put On Fire Sales? Annualised Distribution Yield at 12.9%."

However, I was flabbergasted when the Managing Director of Dasin Retail announced last week that cash distribution for the half year ended 30 June 2021 has been delayed by a week due to "technical" issue. I am not sure what is "technical" issue. But it may mean that there is no cash available or there is breach of banking covenants which seems to be pointing to the fact that negotiation on renewal of the bank loans are not finalized yet. Hidden skeletons may also soon start surfacing. Hence I decided to just sell off most of it and only retain a S$1K position in Dasin Retail Trust.

The Alibaba Fiasco- Catching A Falling Knife?

Wow, Alibaba (HKE 9988) plunge below HKD$150 per share in the region of HKD$140 per share recently. Is this an after effect of Evergrande?  This is a disaster indeed for my "growth stock" investing venture so far. I am still staring into the red despite joining the buying spree only lately but I still plan to continue buying little bit more. Is this catching a falling knife? I still think that the fundamentals of Baba is excellent based on its financial statements and annual growth rate demonstrated. Also, I think that the Communist party will neither be bent on destroying Baba nor nationalizing it out of a sudden. I reckon that the current pressure exerted on Baba has to do with infighting among 2 major factions in the Communist party (Alibaba seems to be linked closely to one of the faction). 

Alibaba has also invested in a number of technological businesses. The most recent one is the USD200Mil being invested in the Singapore Logistics firm, Ninja Van, which specializes in final mile delivery in South East Asia countries. Ninja van has already hit "unicorn" status with a valuation crossing US$1 billion and is expected to go for a listing in US within the next 1-2 years. Any further enhancement in valuation from the Ninja van IPO will reap a handsome return for Alibaba's stake also.   

Anyway, this whole of September 2021 is a bad month for stocks. It also offered a lot of good buying opportunities for income investing. I am happy to have received much of my yearly dividends in September 2021 and to recycle it back into income producing stocks/REITs for more dividends. 

(P.S: I have not updated my Investment Portfolio for sometime. Will probably do it in the next post but too busy recently with work and also catching the super exciting "Squid Game".)