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The Singapore Market this Week: Privatisation Deal for SMRT Corporation Ltd Launched

During the week, our local stock market, as represented by the Straits Times Index  (SGX: ^STI), gained 0.7% to close Friday at 2,945 points.

Of the 30 index components, 19 ended with gains for the week, with Thai Beverage Public Company Limited (SGX: Y92) leading the pack. Meanwhile, nine clocked losses – Singapore Press Holdings Limited (SGX: T39) was the blue chip with the largest decline.

One of the companies in the list of 19 that saw their shares climb during the week is stock market operator and regulator Singapore Exchange Limited (SGX: S68). Its share price inched up by 0.5% to S$7.78.

On Monday, the firm announced that it will be setting up a separate subsidiary company to take over all the front-line regulatory functions it currently performs. This will “further enhance the governance of SGX [Singapore Exchange] as a self-regulatory organisation by making more explicit the segregation of its regulatory functions from its commercial and operating activities”.

The subsidiary will be governed by its own directors who will be independent from Singapore Exchange. The Monetary Authority of Singapore will “continue to directly regulate SGX in terms of its obligations as a listed company and market operator, as well as maintain oversight of SGX’s regulatory responsibilities performed its new subsidiary.”

Singapore Press Holdings, which is responsible for many of Singapore’s largest newspapers, saw its shares fall by 8% from S$4.07 last Friday to S$3.75 this Friday. The firm released its fiscal third-quarter earnings for the year ending 31 August 2016 on 15 July 2016.

It reported a 5% year-on-year decline in revenue to S$292 million on the back of weakness in its largest segment, Media. But, its net profit plunged by a sharp 46.4% to S$53 million mainly due to an impairment charge related to its magazine business.

In the earnings release, Singapore Press Holdings’ chief executive, Alan Chan, mentioned that the company will be conducting a review of its core media business “to better address the evolving needs of our advertising customers and deliver effective, integrated solutions across our various media platforms.”

Another firm within the blue chip universe that experienced a loss during the week is the conglomerate Keppel Corporation Limited (SGX: BN4). The company, which reported a big 48.1% year-on-year decline in second-quarter profit to S$205.8 million due to a poor showing from its offshore and marine business segment, saw its stock price dip by 2.1% to S$5.50.

Outside the Straits Times Index, one of the biggest pieces of news for the stock market this week concerns SMRT Corporation Ltd (SGX: S53). More specifically, the company’s largest shareholder, Temasek Holdings, is looking to privatise it. Temasek, one of the Singapore government’s investment arms, has offered a price of S$1.68 per SMRT Corporation share in a S$1.2 billion deal. The offer price values the transport outfit at around S$2.6 billion.

The privatisation, which is still subject to shareholders’ and regulators’ approvals, will pave the way for SMRT to have “greater flexibility to focus on its primary role of delivering safe and high quality rail service, without short term pressures of being a listed company.”

That said, the privatisation came just a few days after the Land Transport Authority announced that it intends to buy the operating assets of SMRT’s rail business under the New Rail Financing Framework. The sale is again, subject to shareholders’ approval.

SMRT saw its shares rise 6.5% for the week to end at S$1.645, a tad lower than the offer price of S$1.68.  At its current share price, SMRT has a price-to-earnings ratio of 23.

The SPDR STI ETF (SGX: ES3), an exchange-traded fund which can be taken as a proxy for the Straits Times Index, is now going at 12.3 times trailing earnings and sports a dividend yield of 3.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.