Singapore Press Holdings (SPH)

[Drizzt]

Goodness, my made an error in the figures, the cash pile they will be receiving after giving the S$0.18 special dividend should be S$232,743,171.34 (Units sold at S$0.85) to S$263,743,171.34 (Units sold at S$0.90)

Hi Drizzt,

My thoughts on why it is better to buy SPH is because after spinning off the properties into the REIT, SPH’s gearing drops to 9% from 40% and they now have a huge cash pile to build up more malls or to reinvest into other ventures. Furthermore they can gear themselves up to 40% or more again if they wish to, therefore with the cash pile of S$757,743,171.34 (after giving S$0.18 special dividend) and a possibility to gear up again to 40% approximate cash of S$720,769,220 (31% increase in gearing), they have S$1,478,512,391.34 to reinvest.

Total number of shares = 1,612,537,937 (Ordinary + Management + Treasury)

Ungeared Cash increase per share = S$0.4699

If we assume a conservative 4% yield / return on this amount, it is an additional S$70,750,768.80 (with gearing) and without increasing gearing to 40%, it can be an additional S$41,920,000 profits.

Ungeared possible increase in earning per share = S$0.02599

As a REIT manager after spinning off the properties, SPH will have recurring fees based on 2012 values of :

0.25% per annum of the value of deposited Property (S$3,070,500,000) = S$7,676,250

5% NPI (S$137,615,000) = S$6,880,750

0.75% - 1% for Acquisition = S$0

0.5% Divestment = S$0

Dividend from REIT without income support – 2,500,995,000 units – SPH owns 1,750,697,000 which will generate dividend of S$0.04815 per unit (5.35%) = S$84,296,060.55

Total amount of profit before tax generated is S$98,853,060.55 this is quite close to the current profit before tax which SPH is receiving in 2012 of S$99,970,000.

Therefore if SPH can make good use of the cash pile they have, their recurring pre-tax profit can be more than what they would have made if they did not spin off.

On that reason, it is my opinion that it is better to buy SPH.

Now as to the declining profits from the media segment, the drop will not be too drastic looking at the past 5 years and excluding year 2009.

2011 to 2012 drop 8.34%

2010 to 2011 increase 0.25%

2008 to 2010 drop 1.60%

Furthermore SPH has significant free cash flow which gives them a lot of leeway to invest in more properties if they wish to.

Hmm i hope what i have written makes sense.

i thought it should be more 900 mil they will pay out 1/3 leaving 600 there.