SingPost – Lim and Tan
Doing Things
• Sing Post is raising $200 mln via a 10-year fixed rate note issue, to finance "new investments, anticipated capital expenditure and working capital requirements".
• Sing Post's existing 3.13% bonds ($302.91 mln outstanding at end Dec '09) are not due to mature till April 2013.
• The new note issue will raise total borrowings to $502.9 mln, against current Shareholders Funds of $275.52 mln. Cash at end '09 was $148.56 mln.
• Sing Post is expected to release results for ye Mar '10 in late April (on the 30th last year).
COMMENTS
1. We expect the latest development to revive speculation of Sing Post selling the Post Centre at Eunos, and making a special payout.
2. Local press had in July '08 reported that Post Centre was put up for sale at asking price of $850 mln, which would have worked out to 44 cents per Sing Post share. The company announced the termination of the sale negotiations in Apr '09.
3. Fact of the matter is, there is no urgency to sell Post Centre, given Sing Post has done much with it, as seen in the 27% increase in rental and property related income to $30.21 mln in the first nine months of FY 09/10. Revenue from the core business was $391.67 mln.
4. In any case, taking on more debt will not pose a problem, given the strong operating cash flow of in excess of $200 mln a year.
5. We have been recommending BUY, largely because of the attractive utility-type 5.8% yield. (Sing Post has been paying 6.25 cents a share for at least the last 3 fiscal years, comprising quarterly rate of 1.25 cents, and final f 2.5 cents.)
SingTel – BT
Bharti to seek cover from Zain's Nigeria dispute
BHARTI Airtel Ltd, the Indian phone company planning a US$9 billion purchase of Zain's African assets, may ask Zain for legal protection from a dispute in Nigeria, according to a source familiar with the negotiations.
The proposal, to be considered by Bharti's board today, will seek an indemnity from Zain against ongoing litigation involving operations in Nigeria, the source said. Econet Wireless Holdings Ltd, based in a suburb of Johannesburg, is disputing control of Zain's unit in Nigeria.
The Nigerian operations are the single largest revenue producer for Kuwait's Zain, and have been described by Bharti chairman Sunil Mittal 'as the most important piece' of its planned acquisition. Econet chief executive officer Strive Masiyiwa said in an interview on Thursday that there has been no agreement or settlement in the dispute over the Nigerian unit.
Econet has 'not heard from Zain or Bharti' on Nigeria, Mr Masiyiwa said, adding that he's 'cheesed off' about reports that a settlement has been reached.
India's largest wireless company's plan cannot include the purchase of Zain's Celtel Nigeria BV unit, Econet has said. For Bharti, troubles in Nigeria, Africa's most populous nation and its fastest growing telecommunications market, are among hurdles that the company faces as it seeks to take over Zain's operations in 15 African countries.
Kuwait's Mobile Telecommunications Co, or Zain, and Bharti said on Feb 15 that they would hold exclusive talks until March 25 on the assets.
Econet is seeking to overturn a 2006 deal in which Celtel bought a 65 per cent stake in Nigerian mobile operator Vmobile, since renamed Zain Nigeria. Econet, with 5 per cent of Zain Nigeria, said that it should have had the right of first refusal on those shares.
Econet's Mr Masiyiwa has said that the case is still in arbitration and that until that process has been completed, 'Nigeria cannot be sold, it is not for sale, there can be no due diligence by Bharti or any other party.' — Bloomberg
SPAusNet – BT
SP AusNet prices bond at 160 bps
(SYDNEY) Australian energy firm SP AusNet, part owned by Singapore Power, has priced A$300 million (S$384.7 million) of 7.5-year notes at 160 basis points over swap to refinance debt, it said yesterday.
The offer, launched as a A$200 million size deal but capped at A$300 million, paid a slightly lower margin than initially expected at around 165 bps.
The issue completes SP AusNet’s refinancing requirement of A$960 million to 2011, Geoff Nicholson, SP AusNet’s chief financial officer said in a statement.
ANZ, Commonwealth Bank of Australia and Westpac Institutional Bank jointly led the issue, and sold the bonds in Australia and offshore.
This is the second only- bond issue this year from a non-financial borrower in Australia, and follows a sale by toll road operator Transurban earlier this week .
Bond issues from non- financial borrowers are rare in Australia, and investors are relishing the prospect that non-financial borrowers might issue bonds in a market dominated by bank issuers.
Only 3.5 per cent of Australian-dollar bond issuance last year came from non-financial firms, or corporates, according to ADCM data.
Property developer Mirvac Group Ltd is expected to price a five-year bond issue this week. — Reuters
TELCOs – Kim Eng
Share and share alike
What's New
The rising costs of exclusive TV content should no longer be the bugbear it once was once Pay TV operators are required by the Media Development Authority (MDA) to cross‐carry each other's exclusive content later this year. In our view, the biggest beneficiary of the latest change in government regulation will be M1 (BUY, TP $2.45) which will now be able to compete equally with SingTel and Starhub. We also see more advantages for SingTel (BUY, TP $3.42) than Starhub (SELL, TP $1.80).
Our View
In our view, the change in ruling is advantageous for SingTel. Critically, SingTel's exclusive rights to broadcast the EPL are not affected as it acquired the rights last year. The new cross‐carriage ruling applies only to exclusive content acquired or renewed after 12 March 2010.
In the short term, the damage to Starhub is mostly to sentiment as it has locked in key content in multi‐year exclusive contracts, hence margins should stabilise and even improve this year. However, the lack of clarity on which content is involved, when they were renewed or the length of the contracts will still overhang the stock. In the long term, the impact is negative as Starhub will see its hubbing proposition and ability to offer exclusive content devalued.
With equal access to content and infrastructure (once the Next Generation National Broadband Network or NGNBN is up and running throughout the country), M1's main disadvantage as a pure mobile operator will be removed. We would therefore expect M1 to be the biggest winner (other than the consumer).
Action & Recommendation
We see no reason to change our recommendations. All along, our preference has been for M1 (BUY, TP $2.45) among all the telcos. The MDA's policy change further reinforces our view. SingTel (BUY, TP $3.42) should also reap more benefits fairly immediately compared to what it will lose in the longer term. However, the long term impact on Starhub (SELL, $1.80) is negative.
Transport – Phillip
Exciting times ahead
Additional platform at Jurong East Interchange
The construction works on the additional platform and tracks are visible now and slated to be completed in 2012. The additional platform will potentially reduced the train's headway time from 3.2 mins to 0 mins and trains approaching the middle platform do not have to arrive and depart from the same platform. It will also ease congestion at the station, as currently the NS line arrivals are unable to match the frequency of EW line during peak periods. LTA also mentioned that they intend to purchase more trains to increase the frequency and shortened the waiting times for MRT. We believe that this is a positive step forward to encourage more people to take the public transport as waiting and traveling time is foremost on commuter's mind.
COE premiums to spike as vehicle quota system is tweaked
LTA has announced that it will change the way it decide on COE supply to ensure that vehicle growth is kept strictly at the targeted rate. The change has caused COE supply for the April to July period to fall 28% and COE premiums are expected to spike with the impending fall in supply. The reduced supply will aid the government's drive in encouraging more people to take the public transport and reduce congestions on the road. We believe more people will switch to taking public transport as owning a car is becoming more expensive and the motor industry's estimate that COE premiums will hit S$30,000 in the near future. SMRT is set to benefit the most with its strong rail network while Comfort Delgro might be hit with higher costs in replacing its fleet of taxis.
Tourism showing strong rebound in 2010
The Singapore Tourism Board (STB) announced a 23% increase in its forecasts for visitor arrivals in 2010, translating to about 12 million tourists. This is good news for the industry as majority of the tourists will be using public transport to travel around Singapore. We feel that MRT and taxi will be the most commonly used, bringing them to the various attractions in Singapore in the shortest time.
Train riderships maintaining strong growth
MRT riderships continue to grow strongly as reflected in the table above registering a 3.98% year on year growth and 2.83% on a rolling basis for Nov-Jan period. Going forward, the opening of more new lines, improved connectivity and affordable fares will continue to fuel riderships growth. LTA expects circle line to add an additional 200,000 to riderships daily when all circle line stations are opened.
On the other hand, bus riderships are showing a decline of 1.11% year on year and a decline of 1.3% on a rolling basis, which could be attributed to the improved rail network and opening of more train stations. Declines will likely continue when circle line (highlighted in the map below) opens next month and we will see more commuters switching over to trains.
We continue to rate SMRT (Buy: Fair value: S$2.19) as our top pick for its strong exposure to the rail network in Singapore over Comfort Delgro (Hold: Fair value S$1.68).