After the initial gap down after the restructuring announcement, $SINGAPORE PRESS HLDGS LTD(T39.SI)$ has since closed the gap and moved back to the pre-announcement price level.
Is this gain sustainable?
I remained unimpressed by SPH for 4 key reasons:
1) SPH is not just giving away it media business for free. It is, in fact, throwing away S$110 mil in cash, SPH and SPR REIT shares to get rid of the media business.
2) Transaction is NAV dilutive, dropping from S$2.24 per share to S$2.08 per share. Gearing will rise from 30.9% to 32.4%.
3) Lack of confidence in management. The poor handling of media question and attitude of senior management is a good indication of how things are being run in the company.
4) Lack of an impressive track record in real estate thus far.
What should be a fair value for SPH?
Considering that large-cap Singapore RE companies are trading at Price-NAV of 0.8x, I would give SPH a higher NAV discount and hence, lower Price-NAV of 0.7x. This implies a fair value of S$1.46 per share.
Chart-wise, SPH managed to fill the gap last Friday but is showing a weak candlestick and closed near the day’s low. A long red candle confirmation on Monday could indicate a reversal and correction in share price.
Trade with care and DYODD.
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