BUY: Kim Eng Securities Research - Mar 23, 2004 (BT)

BackMar 23, 2004

Brokers' Take

BUY: Kim Eng Securities Research

Mar 23, 2004
The Business Times


Kim Eng Securities Research, March 22

SPH will reap a gain of between $100 million and $110 million from the IPO of Belgacom. SPH has a 10 per cent stake in the joint-venture company, SingTel-ADSB, which has sold shares in the IPO.

With the IPO price fixed at 24.50 euros, SPH would be able to book an exceptional gain of up to 30 cents a share in FY Aug 2004. Strong free cash flow from operations should justify full payment of gains as dividends. We expect SPH to pay out such exceptional gains as special dividends in the second half of the current financial year given its strong balance sheet, huge net cash pile and limited capex requirement.

Total exceptional gain of up to $220 million is already locked in for the current financial year. The sale of the Times House site to Marco Polo, which will net a gain of $110 million, is expected to be completed in April.

Together with the sale of Belgacom shares, special dividends could amount to 60 cents per share this year.

Other non-core investments that could be divested within the current financial year amount to $1.13 per share. This consists of the potential gain from the sale of its remaining 14 per cent stake in M1 (48 cents per share), as well as the divestment of its 9.08 per cent stake in StarHub which may seek an IPO as early as July.

Buy ahead of the release of its interim results next month as the market may start to focus on its earnings recovery and substantial asset divestment gains.