Hot stock: SPH rebounds as much as 5.6% in early trading

SHARES of Singapore Press Holdings (SPH) rebounded as much as 5.6 per cent on Monday. This was after falling on Friday on news of the group's proposed restructuring.

The media and property group, which publishes The Business Times, hit an intraday high of S$1.605 as at 10.10am on Monday, up 5.6 per cent or 8.5 Singapore cents. It later closed at S$1.57, up 3.3 per cent or S$0.05, with 38.1 million shares changing hands amid active trading. 

Last Friday, SPH shares closed 15.1 per cent or S$0.27 lower at S$1.52. The company's media deal, which is subject to shareholders' approval, will involve a transfer of the business to a company limited by guarantee (CLG).

SPH said it will make an upfront capitalisation of S$110 million to the new entity, in the form of a cash injection of S$80 million, and S$30 million worth of SPH shares and SPH Reit units.

In a research note on Monday, UOB Kay Hian (UOBKH) reiterated "buy" on SPH with a sum-of-the-parts-based target price of S$1.85. This represents an upside of about 17.8 per cent from Monday's closing price.

The research team said the valuation has already taken a conservative stance, without accounting for any valuation in the media segment.

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UOBKH said that any adjustments post-restructuring would lower its target price slightly to S$1.79, given a change in SPH Reit's holdings, cash and a higher share base from SPH shares given to the CLG.

"While the initial outlay for the restructuring may not be ideal, total consideration of S$252 million accounts for four to six years of losses for the media segment by our estimates and removes a key overhang for the counter," UOBKH said, with a longer-term outlook in mind.

Assuming the restructuring occurs by the second half of FY2022, UOBKH estimates FY2022 and FY2023 core earnings to be lifted by 26 per cent and 36 per cent respectively.

"If the Newspaper and Printing Presses Act is lifted for SPH, this would also provide shareholding flexibility for the group," the research team said.

READ MORE:

• SPH to transfer media business to not-for-profit entity
• The SPH Journey: A timeline of key events since SGX listing
• MCI expresses support for SPH's proposed restructuring
• SPH deal aims to improve asset values, ease shareholder pressure off media unit
• SPH will need to clarify future plans to secure shareholder approval