Singapore Press Holdings turning into a "pseudo retail REIT"

Its property arm has a growing revenue potential and might just be spun off or sold to an REIT in the long-term, said CIMB.

SPH is functioning more and more like a retail REIT, noted the brokerage firm, with a stable of retail malls driving most of its growth. Meanwhile, its maturing media arm has been relegated to a supportive cashflow role.

CIMB goes as far as recommending SPH as a better alternative for investors seeking to avoid additional exposure to retail S-REITs.

Here's more from CIMB:

Retail malls for growth. With a stable and mature print business, we expect SPH’s growth to come increasingly from its retail malls. Revenue CAGR for SPH’s gem asset, Paragon, had been an impressive 8.3% over 2006-11, outstripping that for comparable assets under retail S-REITs. We expect similar success for its Clementi Mall during its first renewal cycle; with the success extending to its Sengkang Mall on completion.

Stable media business to underpin cashflows. We expect its newspaper & magazine segment to remain dominant and underpin SPH’s cashflows. We expect a seasonally stronger 3QFY12, as strong property, auto and telco display ads mitigate lukewarm GSS ad demand and weaker recruit and classifieds.

Pseudo retail REIT. With typical payouts of >90%, we believe SPH is akin to a retail REIT. Against retail REITs, SPH stands out for its stronger balance sheet and thus limited cash-call risks, in our view. 2Q12 net gearing is low at 35% with property asset values booked at historical costs less depreciation. With a growing property arm, we do not dismiss the possibility of a spin-off or sale of assets to a REIT over the longer term.

Cheaper alternative. SPH has underperformed retail S-REITs YTD and during the recent flight to safety. Yields are now 6.4%  vs. an average of 6.1% for retail S-REITs. We see SPH as a cheaper alternative for investors seeking exposure to retail S-REITs.