SPH mall binge a long-term gamble

The embattled publisher is aggressively diversifying into retail spaces but DBS sounds a note of caution.

DBS thinks that Singapore Press Holdings' latest winning joint bid for the Sengkang West / Fernvale retail site -- its third mall development -- is "a little optimistic."

SPH is banking on expectations that mall rents will tick upwards and boost revenues, and a boom in unit occupants in the surrounding areas, the brokerage added in a flash note.

Here's more from DBS:

SPH's desire for additional retail malls exposure is not surprising. With this latest addition, SPH will own 3 malls, along with Paragon and Clementi Mall.

We find that the bid seems a little optimistic and comes with a view that sub-urban retail rents will continue to have an upward bias. We believe management continues to adopt a long-term perspective with regards to its exposure in this area, and the potential catchment of residential units currently under construction there.

The bid is undertaken via a 70:30 JV by SPH/ United Engineers Developments Pte Ltd

In SPH’s latest 1Q12 results, we see that its property division registered growth, helped by maiden contribution from Clementi Mall and higher rental rates at Paragon. On the other hand, its mainstream newspaper and magazines business showed signs of slowdown in light of the weaker macro-economic environment.

We believe the latest land bid should not have an impact on its dividend per share payout given its strong balance sheet and net cash position.

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