Clementi Mall

HDB announced the bidding results of the Clementi Mall on Tuesday. The good news is a JV of SPH (60%), NTUC fairprice (20%) & NTUC Income (20%) is the winner of this project. The bad news is the bid price is closed to 42% higher than the second highest bidder.

Apparently, the bad news has lead the selling pressure on the SPH from Monday closed price $3.89 till current trading range at about $3.71 - $3.73. I think the investor could be over react on the project, specifically the excessive high bid price. By looking at the longer term perspective, the potential of the mall will definitely bring in the the much bigger benefit to the company. According to Knight Farnk, to archieve a net property yield at about 5.5% - 6%, average gross monthly rental of about $18 psf wold be required, while the current best suburban malls is about $15-16psf. I believe it won't be so difficult to archieve the targeted rental if the momentum of the economic is picking gradually until the completion of the mall.

I was complaining about the crowd and inconvenient of Clementi without a decent shopping mall during my NUS time. Hostel students flooded into Clementi town to get their grocery and foods. The demand of a shipping mall is definitely strong and firm.

Clementi mall will be located at the current temporary bus interchange which comprises two basement levels and five storeys above ground. An air-conditioned bus interchange will be on the first level and the third level will be connected to Clementi MRT Station. Fairprice will also operate a supermarket within. The easy accessible to the mall will definitely draw the crowd from others town nearby.

Generally, I'm quite optimistic on SPH with this new project. The company's effort in diversification of the business will definitely beneficial in longer term. besde it's core business in publication & media, the property investment on Paragon is sucessful, its BUZZ pod retail business and investor/financial onine portal seems also expanding at a faster pace now. The return in short-long term investment in M1 and Starhub will be stable too. It's appropriate to increase its capex to explore the higher benefit to the shareholders.

The strong balance sheet, stable dividend payout is attractive. FY09 dividend stood at 25cts (include contributions from Sky @ 11), assuming the same dividend for FY2010, a yield at $3.74 is an decent 6.7%.