Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

On 30 March, <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> announced that it was undergoing a strategic review to consider options for its various businesses. On 6 May, the company announced that it would be transferring its media business to a not-for-profit entity.Then, on 2 August, <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a> announced that it was proposing to acquire <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> ex the media business and then delist and privatise SPH. Under the terms of the Scheme, for each share of <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> held, shareholders will receive cash of S$0.668, 0.596 units of <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a> and 0.782 units of <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a>.The offer valued <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> at S$2.0987/share (a 11.63% premium to the close of S$1.88/share for SPH) using the closing prices for <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a> and <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a>. Since then, the offer value has dropped to S$2.0507/share while <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> has moved higher to S$1.94/share.On 10 September, <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> shareholders voted in favour of the spin-off of the media business. This paves the way for the next EGM and Scheme Meeting where <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> shareholders will vote on the proposed privatisation by <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a>.<a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> still trades at a 5.4% discount to the offer value and is lower from the 3.1% discount at the close on 31 August. With around 3 months to go before the privatisation is complete (if voted through), there is good value is arbitraging the spread.

On 30 March, Singapore Press Holdings (SPH SP) announced that it was undergoing a strategic review to consider options for its various businesses. On 6 May, the company announced that it would be transferring its media business to a not-for-profit entity.Then, on 2 August, Keppel Corp (KEP SP) announced that it was proposing to acquire Singapore Press Holdings (SPH SP) ex the media business and then delist and privatise SPH. Under the terms of the Scheme, for each share of Singapore Press Holdings (SPH SP) held, shareholders will receive cash of S$0.668, 0.596 units of Keppel REIT (KREIT SP) and 0.782 units of SPH REIT (SPHREIT SP).The offer valued Singapore Press Holdings (SPH SP) at S$2.0987/share (a 11.63% premium to the close of S$1.88/share for SPH) using the closing prices for Keppel REIT (KREIT SP) and SPH REIT (SPHREIT SP). Since then, the offer value has dropped to S$2.0507/share while Singapore Press Holdings (SPH SP) has moved higher to S$1.94/share.On 10 September, Singapore Press Holdings (SPH SP) shareholders voted in favour of the spin-off of the media business. This paves the way for the next EGM and Scheme Meeting where Singapore Press Holdings (SPH SP) shareholders will vote on the proposed privatisation by Keppel Corp (KEP SP).Singapore Press Holdings (SPH SP) still trades at a 5.4% discount to the offer value and is lower from the 3.1% discount at the close on 31 August. With around 3 months to go before the privatisation is complete (if voted through), there is good value is arbitraging the spread.

Keppel Corp / SPH: One Step Closer to Privatisation

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Last Week in Event SPACE: Shinsei Bank, Hongkong Land, SOHO China, Bank Rakyat, Oil Search, JCNC

Travis Lundy

On Friday 9 September, <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> shareholders voted to approve the Media Business Spinoff and the Proposed Restructuring which will allow SPH to spin off the various media assets and some supporting assets it has heretofore controlled into a new non-profit Company Limited by Guarantee.The idea is that the "lifting" of the restrictions of the Newspaper Printing and Presses Act (“NPPA”) would then provide SPH "with greater financial flexibility to tailor its capital and shareholding structure to unlock and maximise value for all shareholders."As discussed first in <a href="https://www.smartkarma.com/insights/singapore-press-own-time-own-target-restructuring-lor-come-i-clap-for-you" target="_blank" data-smartkarma-citation="insights:51141" rel="noopener">Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You)</a>, the upside did not seem huge. A few months later SPH decided that the rest of the business would be taken over by <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a> in return for a basket of cash, units of <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a> and units in <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a>. This was discussed in <a href="https://www.smartkarma.com/insights/alamak-sph-restructuring-restructured-as-keppel-bo-jios-sph-holders" target="_blank" data-smartkarma-citation="insights:55370" rel="noopener">Alamak! SPH Restructuring Restructured as Keppel Bo Jios SPH Holders</a>, and at that, the upside did not seem huge. The price jumped from a div-adjusted S$1.88/share before the Keppel news to S$1.92/unit to close some of the gap. The remaining spread is now quite small at a bit less than 10cts on a forward div-adjusted basis, or about 5%.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/249/original/Screenshot+2021-09-11+at+2.04.22+PM.png?1631340279" class="editor-image img-responsive" data-smartkarma-image-id="229249"></figure></section>From the day before the Keppel announcement until now, the value of the non-cash portion of the Consideration (i.e. the 0.596 units of KREIT and the 0.782 units of SPH REIT) have fallen 2.55% in value while the value of an equal weighted Peer Basket of REITs has fallen 2.45%. That tells you that despite the first-day drop in the value of SPH REIT and Keppel REIT resulting from market participants' expectation that hedging pressure on those two REITs would cause them to underperform the market, the underperformance has been minimal. I expect the high cost of borrow and relative illiquidity of S-REITs has limited the appeal of the arb to arbitrageurs.Now we wait for the EGM to approve the distribution of SPH REIT units and the Scheme Meeting to dispose of the SPH business in return for KREIT units and cash. That should happen in the October/November timeframe.In the meantime, we check progress of the arb, and what the value of the Consideration is compared to a comparable Peer Basket.

On Friday 9 September, Singapore Press Holdings (SPH SP) shareholders voted to approve the Media Business Spinoff and the Proposed Restructuring which will allow SPH to spin off the various media assets and some supporting assets it has heretofore controlled into a new non-profit Company Limited by Guarantee.The idea is that the "lifting" of the restrictions of the Newspaper Printing and Presses Act (“NPPA”) would then provide SPH "with greater financial flexibility to tailor its capital and shareholding structure to unlock and maximise value for all shareholders."As discussed first in Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You), the upside did not seem huge. A few months later SPH decided that the rest of the business would be taken over by Keppel Corp (KEP SP) in return for a basket of cash, units of SPH REIT (SPHREIT SP) and units in Keppel REIT (KREIT SP). This was discussed in Alamak! SPH Restructuring Restructured as Keppel Bo Jios SPH Holders, and at that, the upside did not seem huge. The price jumped from a div-adjusted S$1.88/share before the Keppel news to S$1.92/unit to close some of the gap. The remaining spread is now quite small at a bit less than 10cts on a forward div-adjusted basis, or about 5%.From the day before the Keppel announcement until now, the value of the non-cash portion of the Consideration (i.e. the 0.596 units of KREIT and the 0.782 units of SPH REIT) have fallen 2.55% in value while the value of an equal weighted Peer Basket of REITs has fallen 2.45%. That tells you that despite the first-day drop in the value of SPH REIT and Keppel REIT resulting from market participants' expectation that hedging pressure on those two REITs would cause them to underperform the market, the underperformance has been minimal. I expect the high cost of borrow and relative illiquidity of S-REITs has limited the appeal of the arb to arbitrageurs.Now we wait for the EGM to approve the distribution of SPH REIT units and the Scheme Meeting to dispose of the SPH business in return for KREIT units and cash. That should happen in the October/November timeframe.In the meantime, we check progress of the arb, and what the value of the Consideration is compared to a comparable Peer Basket.

SPH Shareholders Approve Spinoff - There's Still a Spread To Earn

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a>/SPH announced a privatisation offer from <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a>. Keppel is taking private SPH through via a scheme of arrangement. The transaction involves Keppel offering S$0.668 cash per SPH share and 0.596 Keppel REIT units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT units per SPH share. Based on the last close price of <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a> and <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a>, the total consideration is S$2.099 per SPH share, which is a 39.9% premium to the share price of S$1.50 on 30 March 2021 (announcement of SPH’s strategic review) and an 11.6% premium to the share price of S$1.88 on 30 July 2021 (last trading day). The privatisation proposal is the culmination of the SPH’s strategic review to unlock shareholder value. Keppel's offer was the best offer from several proposals evaluated, according to SPH management. The strategic review commenced with the announcement of the media business restructuring announced on 6 May. Post completion of the media business restructuring (requires approval at the EGM in Aug-Sep), SPH would be released from NPPA restrictions including the 5% shareholding cap restriction. Due to the impending lifting of the 5% shareholding cap, the SPH Board's preference was an offer for the whole SPH, to ensure the emergence of a controlling shareholder.<div class="content-highlight">The key conditions for the successful privatisation are the completion of the media business restructuring, regulatory approval, SPH and Keppel shareholder approval. The modest premium/discount to historical long-term multiples and share prices is unlikely to excite long-term SPH shareholders. The offer price is largely designed to appeal to SPH shareholders lacking patience for SPH to unlock value through capital recycling (such as a listing of PBSA assets, disposal of investments), a post-COVID-19 recovery particularly in its property businesses and improving earnings quality through diversifying into defensive assets. Overall, while the implied offer price is not a knockout bid, it is ok in the context of our SoTP valuation (post-media business restructuring). </div>

Singapore Press Holdings (SPH SP)/SPH announced a privatisation offer from Keppel Corp (KEP SP). Keppel is taking private SPH through via a scheme of arrangement. The transaction involves Keppel offering S$0.668 cash per SPH share and 0.596 Keppel REIT units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT units per SPH share. Based on the last close price of Keppel REIT (KREIT SP) and SPH REIT (SPHREIT SP), the total consideration is S$2.099 per SPH share, which is a 39.9% premium to the share price of S$1.50 on 30 March 2021 (announcement of SPH’s strategic review) and an 11.6% premium to the share price of S$1.88 on 30 July 2021 (last trading day). The privatisation proposal is the culmination of the SPH’s strategic review to unlock shareholder value. Keppel's offer was the best offer from several proposals evaluated, according to SPH management. The strategic review commenced with the announcement of the media business restructuring announced on 6 May. Post completion of the media business restructuring (requires approval at the EGM in Aug-Sep), SPH would be released from NPPA restrictions including the 5% shareholding cap restriction. Due to the impending lifting of the 5% shareholding cap, the SPH Board's preference was an offer for the whole SPH, to ensure the emergence of a controlling shareholder.The key conditions for the successful privatisation are the completion of the media business restructuring, regulatory approval, SPH and Keppel shareholder approval. The modest premium/discount to historical long-term multiples and share prices is unlikely to excite long-term SPH shareholders. The offer price is largely designed to appeal to SPH shareholders lacking patience for SPH to unlock value through capital recycling (such as a listing of PBSA assets, disposal of investments), a post-COVID-19 recovery particularly in its property businesses and improving earnings quality through diversifying into defensive assets. Overall, while the implied offer price is not a knockout bid, it is ok in the context of our SoTP valuation (post-media business restructuring). 

Just under three months ago, <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> which is a mini-conglomerate of major Singaporean media interests, an investment fund, and a diverse collection of development and leasing assets in the real estate business, announced that it would restructure, hiving off the media assets into a SPINCO, granting it a pile of cash and assets designed to allow it to work through its problems to stand on its own, then it would be REMAINCO for the real estate and investment assets. This was discussed in <a href="https://www.smartkarma.com/insights/singapore-press-own-time-own-target-restructuring-lor-come-i-clap-for-you" target="_blank" data-smartkarma-citation="insights:51141" rel="noopener">Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You)</a>. The shares dropped on the announcement because SPH was giving away cash to the media business. It was costing them money to throw it away. At the time, I suggested that the pre-announcement price of S$1.79/share was reasonably full when looking at the future SPH REMAINCO at something like 0.84x Adjusted Post-Deal P/NAV. Since then, as real estate in Singapore has rallied, SPH shares have rallied from the low S$1.50s where they fell to Friday's S$1.88/share.<h3>The NEW News</h3>This morning we get news that after a period of further review, SPH has decided to accept (<a href="https://links.sgx.com/FileOpen/Proposed%20Privatisation%20of%20SPH%20by%20Keppel%20-%20Joint%20Announcement.ashx?App=Announcement&amp;FileID=676909" target="_blank" rel="noopener">announcement</a>, <a href="https://links.sgx.com/FileOpen/Proposed%20Privatisation%20of%20SPH%20by%20Keppel%20-%20Media%20Release.ashx?App=Announcement&amp;FileID=676910" target="_blank" rel="noopener">press release</a>, <a href="https://links.sgx.com/FileOpen/Proposed%20Privatisation%20of%20SPH%20by%20Keppel%20-%20Presentation.ashx?App=Announcement&amp;FileID=676911" target="_blank" rel="noopener">presentation</a>) being taken over by <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a> based on a Scheme which will deliver to SPH holders S$0.668 in cash, 0.596 units of Keppel REIT, and 0.782 units of SPH REIT through a distribution of 45.4% of SPH's stake in the REIT.Based on the closing prices of 30 July 2021, that would be S$2.099/share or an 11.6% premium to the close. Any dividend that SPH would declare for the fiscal year ending 31 August 2021 would be additive (consensus estimates currently imply ~S$0.02-0.03/share (details in the footnote at the bottom of <a href="https://links.sgx.com/FileOpen/Proposed%20Privatisation%20of%20SPH%20by%20Keppel%20-%20Joint%20Announcement.ashx?App=Announcement&amp;FileID=676909" target="_blank" rel="noopener">p3</a>).There are a fair number of conditions. Approval of the Media Business Restructuring at the SPH EGM later this month or September is a sine qua non - if that doesn't pass SPH shareholders, the thing is off. Then there is another EGM at end-Oct early Nov to approve the resulting deal.  The CEO of Keppel made a presentation on the deal, and his speech is <a href="https://links.sgx.com/FileOpen/GCAT_Speech%20by%20CEO%20Keppel%20Corporation%20on%20proposed%20acquisition%20of%20SPH%20ex-Media.ashx?App=Announcement&amp;FileID=676925" target="_blank" rel="noopener">here</a>. He clearly says the SPH assets are a good deal for Keppel and go some ways to helping Keppel aim at its Vision 2030 goals through enhancing the value of the SPH assets. I note, however, that SPH shareholders get to sell their shares at below book to receive assets that Keppel is liquidating (and mentioning it as a good thing). <div class="content-highlight">SPH holders may be start to ask themselves "Hey Keppel, why you bo jio me?!"</div>There are more complications besides so they are discussed below.

Just under three months ago, Singapore Press Holdings (SPH SP) which is a mini-conglomerate of major Singaporean media interests, an investment fund, and a diverse collection of development and leasing assets in the real estate business, announced that it would restructure, hiving off the media assets into a SPINCO, granting it a pile of cash and assets designed to allow it to work through its problems to stand on its own, then it would be REMAINCO for the real estate and investment assets. This was discussed in Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You). The shares dropped on the announcement because SPH was giving away cash to the media business. It was costing them money to throw it away. At the time, I suggested that the pre-announcement price of S$1.79/share was reasonably full when looking at the future SPH REMAINCO at something like 0.84x Adjusted Post-Deal P/NAV. Since then, as real estate in Singapore has rallied, SPH shares have rallied from the low S$1.50s where they fell to Friday's S$1.88/share.The NEW NewsThis morning we get news that after a period of further review, SPH has decided to accept (announcement, press release, presentation) being taken over by Keppel Corp (KEP SP) based on a Scheme which will deliver to SPH holders S$0.668 in cash, 0.596 units of Keppel REIT, and 0.782 units of SPH REIT through a distribution of 45.4% of SPH's stake in the REIT.Based on the closing prices of 30 July 2021, that would be S$2.099/share or an 11.6% premium to the close. Any dividend that SPH would declare for the fiscal year ending 31 August 2021 would be additive (consensus estimates currently imply ~S$0.02-0.03/share (details in the footnote at the bottom of p3).There are a fair number of conditions. Approval of the Media Business Restructuring at the SPH EGM later this month or September is a sine qua non - if that doesn't pass SPH shareholders, the thing is off. Then there is another EGM at end-Oct early Nov to approve the resulting deal.  The CEO of Keppel made a presentation on the deal, and his speech is here. He clearly says the SPH assets are a good deal for Keppel and go some ways to helping Keppel aim at its Vision 2030 goals through enhancing the value of the SPH assets. I note, however, that SPH shareholders get to sell their shares at below book to receive assets that Keppel is liquidating (and mentioning it as a good thing). SPH holders may be start to ask themselves "Hey Keppel, why you bo jio me?!"There are more complications besides so they are discussed below. 

Alamak! SPH Restructuring Restructured as Keppel Bo Jios SPH Holders

Singapore

SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets.

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SPH REIT (SPHREIT SP)

Keppel Corp / SPH: One Step Closer to Privatisation

SPH shareholders have voted in favour of the spin-off of the media business. This paves the way for the next EGM to vote on the privatisation by...

Brian Freitas

Last Week in Event SPACE: Shinsei Bank, Hongkong Land, SOHO China, Bank Rakyat, Oil Search, JCNC

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

SPH Shareholders Approve Spinoff - There's Still a Spread To Earn

SPH shareholders approve the Media Biz spinoff, now there are ~4mos left until payout (assuming EGM/Scheme Mtg in Oct/Nov gives the thumbs up)....

Travis Lundy

SPH’s Privatisation by Keppel

SPH announced a privatisation offer from Keppel for a total consideration is S$2.099 per share. While the implied offer price is not a knockout...

Arun George

Alamak! SPH Restructuring Restructured as Keppel Bo Jios SPH Holders

SPH and Keppel have a deal. Keppel will take over SPH post-Media spinoff, paying cash and shares in two REITs. It's a bit cheap, a bit ugly. But...

Travis Lundy

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