Hot stock: SPH and SPH Reit shares mixed on privatisation offer from Keppel

SHARES of Singapore Press Holdings (SPH) T39 and units of SPH Reit SK6U were mixed in early trade on Tuesday, after Keppel on Monday offered to privatise SPH's non-media business through a S$2.2 billion bid.

SPH shares were trading at a high of S$1.96 as at 9.01am on Tuesday, up S$0.08 or 4.3 per cent.

Meanwhile, SPH Reit units reached a low of 87.5 Singapore cents as at 9.22am on Tuesday, down four cents or 4.4 per cent.

No married deals were recorded, according to ShareInvestor data.

As at the midday break, shares of SPH have eased to S$1.93, up S$0.05 or 2.7 per cent, but the counter remains actively traded, with 40 million shares changing hands.

SPH Reit units have also eased to 88.5 cents as at the midday break, down three cents or 3.3 per cent.

The privatisation offer values SPH at S$3.4 billion, and will only take effect upon a successful completion of SPH's proposed media restructuring. SPH had in May announced a plan to transfer its media business to a company limited by guarantee (CLG), amid the ongoing challenge of falling advertising revenue.

Under the scheme, SPH shareholders will receive a total consideration of S$2.099 per share. This will comprise cash of S$0.668 per share, 0.596 Keppel Reit unit (valued at S$0.715) and 0.782 SPH Reit unit (valued at S$0.716) per share.

The offer price represents a 39.9 per cent premium to the last traded price of S$1.50 per share before a strategic review of SPH's businesses was announced on March 30. It is also equivalent to SPH's adjusted net asset value per share excluding the media business.

The scheme will require approval from both SPH and Keppel shareholders. If it goes through, SPH will be delisted and will become a wholly owned subsidiary of Keppel. Keppel will hold stakes of about 20 per cent in both SPH Reit and Keppel Reit.

Analysts are recommending that investors accept the offer. UOB Kay Hian analyst Lucas Teng said the offer price is fair, although it could be slightly higher, "but not by much".

He also noted that a full privatisation avoids the situation where SPH's prime assets are "cherry picked", which may leave SPH with its remaining debt and the risk of monetising its remaining assets.

DBS analysts Geraldine Wong and Derek Tan said the privatisation gives shareholders an opportunity to monetise stakes in the non-media business post the media restructuring plans.

The research team raised its target price on SPH to S$2.10 from S$1.64, pegged to the privatisation offer, noting that the integration of SPH into the larger Keppel umbrella points towards a possible combination that offers size, scale and synergy.

"The offer grants unitholders a chance to trade up for stakes in SPH Reit and Keppel Reit, both of which are supported by growing yields of 2 to 4 per cent year on year going into FY2022," they said.

DBS also raised its target price on SPH Reit to S$0.92 from S$0.80, pegged to the privatisation offer, while maintaining a "hold" call on the counter.

The analysts said although SPH Reit units will likely trade sideways for now, given the offer price is locked in at current trading levels, free float will increase substantially post-deal and place the real estate investment trust higher on the list of candidates for index inclusion.

SPH owns and publishes The Business Times, which will be part of the proposed CLG.

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