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).
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