Bond Articles


Singapore Press Holdings: Proposed Media Restructuring

Timothy Ang  |   10 May 2021  |    226 views

Summary

  • Credit metrics little change after removal of lossmaking business.
  • SPH share valuations look undemanding.
  • SPH perpetual bonds look attractive. We prefer the SPHSP 4.5% Perpetual (SGD) with a yield to call of 3.79% callable on 7 June 2024.

Singapore Press Holdings Limited (SPH) announced a proposed restructuring of its media assets and operations on 6 May 2021. Subject to SPH shareholder and regulatory approval, SPH’s media business (SPH Media) will be transferred to a company limited by guarantee (CLG) for a consideration of S$1. The CLG will be a not-for-profit entity, and any profits by SPH Media will be kept within the CLG. After the proposed restructuring, SPH will no longer own or operate the media business. Below are highlights of the restructuring.

The proposal. The lossmaking media business will be transferred to a not-for-profit company limited by guarantee. A total of S$351.3mn of assets will be transferred from SPH’s books into the CLG. These include S$88.8mn in target shares of relevant media companies including SPH’s stake in 4 digital assets, S$147mn market value of key leases from SPH News Centre and SPH Print Centre, S$21.4mn in 23.4mn units of SPH REIT (as at 28 Feb 2021), S$14.1mn in 6.9mn shares of SPH (as at 28 Feb 2021), and S$80mn in cash from SPH balance sheet. The amount of cash and shares transferred will be used to tide the media business for 3-4 years before seeking its own funding sources. Any debt in the media business will be left in SPH balance sheet.

SPH financial metrics little change. The restructuring represents a 6.7% fall in SPH net asset value. SPH’s net debt to asset will rise to 32.4% from 30.9% due to a lower asset base. EBIT interest coverage will improve slightly to 2.2x from 2.1x given the deconsolidation of the lossmaking business. 

Singapore Press Holdings Financial Metrics

Valuations undemanding after deconsolidation. Based on FY21e profit after taxes and minority interest after stripping out the media losses, SPH’s price to earnings ratio (PE ratio) stands at 9.4x. This PE ratio level remains at historically low levels despite the removal of the lossmaking media business. We may see this multiple expand closer to SPH’s 3 year average PE of 14x on improved fundamentals. From a book value perspective, SPH’s price to book ratio stands at 0.68x after the restructuring, which is both historically low and also low compared to SPH REIT’s price to book of 0.85x. SPH’s 66% stake in SPH REIT is worth S$2.82bn, higher than SPH’s market cap of S$2.43bn.

Singapore Press Holdings PE Ratio

Source: Bloomberg

Bond valuations

We see value in the SPHSP 4.5% Perpetual (SGD) bond. SPH perpetual bonds saw a slight selloff after the restructuring announcement. They now trade closely to the comparable Starhill Global REIT bonds despite SPH’s larger market cap of S$2.59bn (vs Starhill’s S$1.2bn) and lower gearing level of 32.4% (vs Starhill’s 35.9%).

The SPHSP 4.5% Perpetual (SGD) bond is priced at 102.05 with a yield to call of 3.79% callable on 7 June 2024 with a 1% coupon step-up if not called. It offers relative value over the SPHSP 4.0% Perpetual (SGD), with a 0.11% yield pickup despite having an earlier call date. The bond also comes with dividend stopper and pusher clauses, which help protect boldholder coupons.

Singapore Press Holdings Bond Valuations

Source: Bloomberg, POEMS

Timeline. EGM shareholder approval Jul-Aug 2021. Restructuring completion expected around 4Q21 to early 2022.

Related Articles

Singapore’s First Infrastructure Bond Expected in October

The first Significant Infrastructure Government Loan Act (SINGA) bond will be issued soon for Singapore's development expenditure spending.

Phillip Bonds  |   16 Sep 2021

Starhill Global REIT: Stable Investment Grade Bonds

Starhill Global REIT is positioned for retail recovery as Singapore reopens, with a long WALE of 5 years and high occupancy of 99%.

Phillip Bonds  |   03 Sep 2021

What is a Commercial Paper: Fixed Income

Commercial papers are short-term debt instruments that typically pay higher yields than government bonds. Here's what makes them attractive.

Phillip Bonds  |   10 Aug 2021

Disclaimers


These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the "Research") contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

Enquiry


Have an enquiry? Get in touch with us at (+65) 6212 1818 or message us below!
Not yet an account holder? Open an account online here