SPH-UE venture’s bid for Sengkang mall site is tops

Offer of $1,155.52 psf ppr is 20.5% above closest rival’s

A 70:30 Singapore Press Holdings and United Engineers tie-up has emerged as the top bidder for a shopping centre site at the corner of Sengkang West Avenue and Fernvale Road with a bid of $328 million or $1,155.52 per square foot per plot ratio (psf ppr).

The state tender for the 99-year leasehold, triangular plot next to Fernvale LRT Station was well participated, drawing 12 bids.

The top bid was about 20.5 per cent or $55.8 million more than the second highest offer of $272.2 million or $959 per square foot per plot ratio (psf ppr) by Han Chee Juan’s Alpro Management Services. Mr Han developed Iluma mall in Bugis which he later sold to CapitaMall Trust.

Alpro’s bid at yesterday’s tender for the commercial plot in Sengkang was $44.8 million or about 20 per cent above the third highest bid of $227.4 million or $801.12 psf ppr from a Mapletree unit.

A unit of Frasers Centrepoint – the group that developed Compass Point mall next to Sengkang MRT Station, about 2 km away from the latest plot – offered $770.14 psf ppr. The 94,618 sq ft plot tendered yesterday can be developed into a gross floor area of up to 283,854 sq ft.

SPH owns Paragon along Orchard Road and 60 per cent of Clementi Mall, which opened last year and is profitable. Based on the group’s top bid at yesterday’s tender in Sengkang West, market watchers’ estimates of the breakeven cost for a new mall project range from about $2,400 psf to $2,600 psf.

Knight Frank group managing director Danny Yeo, who estimates the breakeven cost at about $2,500 psf, said: ‘Assuming an investor is looking to achieve a 5 per cent net yield based on this breakeven cost, it would need a gross monthly rental of about $14 per square foot.’

‘This is a location with a lot of growth potential because this part of Sengkang has a good mix of existing public housing and landed homes (in the nearby Yio Chu Kang and Seletar areas). In addition, there’s potential for more middle-class public housing to be built in the area. And then there’s the Seletar Aerospace Park. All these will provide a good catchment of shoppers for the proposed mall development on this site.’

Credo Real Estate executive director Ong Teck Hui too said: ‘It is timely for a new retail mall to cater to the residents in the locality, which is a growth area…According to HDB’s annual report, there are some 46,000 flats in Sengkang, while the projected ultimate is 90,000 units.’

Mr Ong attributes the strong response to yesterday’s tender to ‘optimism that suburban retail business will continue to do well in spite of slower economic conditions’.

‘A retail centre with a trade mix that caters more to the needs of heartlanders is likely to be well patronised by shoppers, thus ensuring its viability. Furthermore, many retailers are keen to establish footholds in new retail centres in order to grow their business,’ he added.

Other bidders at yesterday’s tender included Hong Leong Holdings unit Noscom Investments, Sim Lian and Mercatus Retail Holdings (said to be linked to NTUC Income and NTUC FairPrice). Guthrie teamed up with Sun Venture to bid $629.90 psf ppr.

Other bidders included Mezzo Development, and Singapore Land unit SL Development. The lowest bid by Unique Capital was at $452 psf ppr.

SPH submits highest bid of $328 million for Sengkang commercial site

Singapore Press Holdings has topped a state land tender exercise for a commercial site in Sengkang with its bid of $328 million.

The $328 million bid works out to $1,156 per square foot per plot ratio (psf ppr) , higher than the $800 psf ppr price market watchers had earlier predicted.

Located at the junction of Sengkang West Avenue and Fernvale Road, the land site measures 94,618 sq ft and can potentially be developed into a landmark commercial development.

The competitive land tender saw a total of 12 developers vying for the plot that sits at the junction of Sengkang West Avenue and Fernvale Road.

From HDB site,

Land Parcel at Sengkang West Avenue / Fernvale Road (Sengkang P2) for Condominium Development

Tender Launch Date : 21 Nov 2011
Tender Close Date : 17 Jan 2012

Note: A decision on the award of the tender will be made after the bids have been evaluated. This will be announced at a later date.

SPH submits highest bid of $328 million for Sengkang commercial site

Singapore Press Holdings has topped a state land tender exercise for a commercial site in Sengkang with its bid of $328 million.

The $328 million bid works out to $1,156 per square foot per plot ratio (psf ppr) , higher than the $800 psf ppr price market watchers had earlier predicted.

Located at the junction of Sengkang West Avenue and Fernvale Road, the land site measures 94,618 sq ft and can potentially be developed into a landmark commercial development.

The competitive land tender saw a total of 12 developers vying for the plot that sits at the junction of Sengkang West Avenue and Fernvale Road.

From HDB site,

Land Parcel at Sengkang West Avenue / Fernvale Road (Sengkang P2) for Condominium Development

Tender Launch Date : 21 Nov 2011
Tender Close Date : 17 Jan 2012

Note: A decision on the award of the tender will be made after the bids have been evaluated. This will be announced at a later date.

RETAIL LANDLORD STRATEGY COMING ALONG NICELY

•Print ads slow down

•Offset by Clementi Mall income

•Support from 6.5% dividend yield

1QFY12 PATMI of S$97.5m or 6 S-cents per share.

Singapore Press Holdings (SPH) reported 1Q12 PATMI of S$97.5m or 6 S-cents per share, down 4.7% YoY. This was mainly due to a poorer performance from the Newspaper and Magazine segment, offset by added contributions from Clementi Mall. 1Q12 PATMI formed 26.3% of our FY12 forecast and is broadly in line with expectations. The topline came in at S$332.4m which is 4.3% higher YoY due to Clementi Mall (rental income of S$9m) and new shows in the exhibitions business, but was partially offset by Newspaper and Magazine revenues falling 1.2% YoY.

Print advertisement performance softer YoY.

As anticipated, we saw 1QFY12 revenues from print advertisement fell 1.2% YoY, driven by declines in both display and classified ads. Display ads demand from the fast moving consumer goods and banking/finance segments fell relative to 1QFY11, while demand increased from the property and fashion segment. There were also pressure from operating costs; newsprint and staff costs increased 4.2% and 1.5%, respectively.

Retail property strategy coming along nicely.

Clementi Mall contributed S$9m to revenues as it ramped up into full operations this quarter, its added contributions buttressing earnings significantly. We like the visibility of recurring income from a suburban retail mall, and believe management’s strategy of building a stable counterweight to the print business is coming along nicely. With ~S$1.2bn of investible funds in its arsenal, we expect SPH to add to its retail landlord portfolio over FY12-13.

Upgrade to BUY.

We also saw a S$12.9m mark-down in available-for-sale assets, made up in part of listed equities in listed telcos and REITs. While more mark-downs could come if equity markets soften, we are not overly concerned given the yield and defensiveness of these holdings. Upgrade to BUY at a fair value estimate of S$3.99 and expected dividends of S$0.24 in FY12.

Weaker investment income

1Q12 ad revenue slowed as expected though investment income fell more than anticipated. Its share price could remain supported by decent yields of 6% but we see this balanced by receding ad growth and investment income.

1Q12 core profit is in line at 25% of our FY11 estimate and consensus. Stronger property earnings and lower finance costs made up for weaker print and investment income. We keep our EPS estimates and SOP target price. Maintain Neutral.

Slowdown in ad growth

We expect slower ad revenue in FY12 because of a weakening economy. The slowdown had already been apparent in 1Q12 when newspaper ad revenue fell 4% yoy on weaker display (-3% yoy) and classified (-4% yoy), albeit from a high base in 1Q11. While SPH tried to keep a tight lid on costs (staff and newsprint costs were up 2% and 4% respectively), this was not sufficient. We expect sustained topline weakness and a slight cost reprieve from softening newsprint prices and variable staff costs in the coming quarters.

Investment income succumbed

While risks to its investment portfolio were to be expected given market volatility, SPH surprised with a 90% yoy fall in investment income due to unrealised FX losses on investments. We understand that these were mainly related to forward hedging contracts for both investments and newsprint exposure, stemming from a stronger US$. With continued market volatility and possibly unabated US$ strength, risks remain.

Property only performer

Property was the sole performer as rental revenue grew 27% yoy with the aid of Clementi Mall which had commenced operations in 2QFY11 and higher rental rates at Paragon (+3% yoy). Both are fully leased.