SPH

SPH: DB highlights that the potential injection of all three properties into a REIT could leave SPH with a media asset which is currently facing structural challenges, after recent announcement that Group is currently exploring the establishment of a REIT to be listed on the SGX. The positive implication is that SPH could receive management fees and tax-exempt distribution in the form of dividends from the REIT. As at SPH’s latest valuation, Paragon Mall was valued at $2.43b, Clementi Mall at $598m and Seletar Mall at $505m. DB currently include these properties at 10% discount to fair value in its sum-of-the-parts valuation of SPH. Comparable retail-focused REITS like CMT and MCT are trading at 1.3x P/B. But House note Paragon’s attributable area to office/medical suites and SPH’s relative lack of track record as a REIT manager may imply a comparatively smaller premium. Assuming the potential SPH REIT trades between 1x to 1.1x P/B, this would add $0.20-$0.39/share to its SOTP valuation of SPH.