SPH - Q408 Estimates

FY08
- Q1 : EPS = 7ct
- Q2 : EPS = 6ct ; DPS = 8ct
- Q3 : EPS = 8ct

FY07 : Payout Ratio = 81.3%
- Q1 : EPS = 7ct
- Q2 : EPS = 7ct ; DPS = 7ct
- Q3 : EPS = 10ct
- Q4 : EPS = 8ct ; DPS = 19ct

FY06 : Payout Ration = 88.9%
- Q1 : EPS = 6ct
- Q2 : EPS = 5ct ; DPS = 7ct
- Q3 : EPS = 11ct
- Q4 : EPS = 5ct ; DPS = 17ct

From the above, EPS for Q4 is usually lower than Q3 (same also for FY05). However, for FY08, recent published ADEX figures is suggesting that SPH may show a strong Q4 earnings. If I were to assume an EPS of 9-10cts (use 10cts) and using an 80-90% payout ratio (reference from past years), we can expect a final DPS of 17-20ct. Note that if I were to take a Q4 EPS of 8ct (same as Q3), the final DPS would be 15-18ct.

A recent DBSV report is forecasting a 24ct final DPS but I think that would be a very optimistic case. Although earnings from their mainstream income of ADEX, Paragon and Sky@Eleven will likely continue to be strong, I'm expecting Net Profit to be dragged down by their Investment Income (same as Q3).

Nevertheless, from past trends of SPH, the share price will usually start to creep up slowly, leading towards their FY08 results announcement sometime in B/Oct. I hope to see it hit at least $4.50 and possibly higher if more reports, similar to DBSV appears. :D

FYR, my recent buys,
- 10 Jul 08 : $4.19
- 15 Jul 08 : $4.08
- 21 Jul 08 : $4.04
- 25 Jul 08 : $3.99 ; Contra off on 31 Jul-08 : $4.03
- 19 Aug 08 : $4.01

Comments
I used to be a long term investor of SPH. In 2005, SPH was the No.1 stock in my portfolio. However, over the years, I have noticed that, although SPH is a fundamentally strong stock, it's price fluctuations within a year can range from sub-$4 to $4.8x. The price run-up usually occurs prior to their mid-year and final year results and the decay, after it goes xd. From 2006, I have changed my strategy to holding only a small position of SPH, buying more on price dips and selling on price jumps of 10-20cts. This way, I make more from Capital Gains as compared to holding for the dividends. In between, the cash could also be better deployed for other investments/trades. This year, I'm planning to hang on to my SPH and wait for bigger Capital Gains of at least 10-15% before selling. Wish me luck! :D


Disclaimer : Not an inducement to buy, do your own research!

AllCo -> Frasers

The sale of Allco Fianance's stakes in Allco and the Trust mgmt co. to Frasers was completed on 14-Aug-08 as per their SGX Annc. So, what can we expect fm now?

Some background,

Allco
- Gearing high at 44%
- Allco Finance facing severe credit crunch
- Moody's downgraded Allco
- Allco planned to sell Aussie assets to reduce gearing and focus on Asia

Frasers
- Initially planned to hv own REIT for their Office assets
- Decided to takeover Allco and inject their assets into Allco at a later date

I see 3 possible scenarios fm now,

1) Continue with AllCo's Plan
- Sell off Aussie assets as Frasers may not hv the experience in Aussie mkt
- Money raised will be used to purchase assets fm Frasers

2) Issue New Shares as Payment for Frasers' Assets
- Frasers hv only 18%+ stake in Allco and may be willing to increase that (they hv 51% stake in FCT)

3) Equity Fund Raising at Discount
- Will subscribe for all excess (same as Mapletree and PST)
- Good for Frasers as they get to increase their stake in Allco at a discount
- Funds raised to be used to purchase Frasers' assets

IMO, (3) would be the worst case scenario (for shareholders) as it'd cause the share price to likely free fall to the New Shares discount level (same as Mapletree which dropped 20%) altho' it could be lower if they give a smaller discount (PST offered at 5%).

In all 3 scenarios, the yield will very likely drop as current yield of 9.6% @ $0.715 is already high and yield accretion is only possible if they fund any acquisition via debts.


Other Comments

Positives
- With Frasers, a lot of uncertainties have been removed
- Moodys will likely revise their ratings positively
- Refinancing of their debts will now be easier and they should be able to get competitive rates
- Best yielding Office REIT (KREIT, CCT aro' 6%)
- With Mr Lee Hsien Yang in F&N, shareholders ought to be better respected

Negatives
- Funds still need to be raised for their intended acquisitions from Frasers
- At last count, 6 other REITs are offering better yields


To be continued if I can think of anything else .....

Banks

Singapore Yield Stocks

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