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SPH’s purchase of Clementi Mall looks more like a bad buy than a good one

Yesterday I wrote an article revisiting SPH as an income stock (You can read it here).

The article highlights that one of SPH’s strategy is to become a quasi-REIT to diversify its business risk from a press business whose moat is getting more narrow.

One of its recent purchase have been Clementi Mall.

The purchase of Clementi Mall

The purchase of Clementi Mall was through a consortium CM Domain Pte Ltd, which is under SG Domain Pte Ltd which is then owned by Times Properties Private Limited which is wholly owned by SPH as well as NTUC FairPrice and NTUC Income.

The breakdown of ownership is

  • Times Properties (60%)
  • NTUC FairPrice (20%)
  • NTUC Income (20%)

Clementi Mall

  1. NLA of 194,000 sf or 18,000 sq metres of retail space
  2. Retail/Commercial GFA of 269,100 psf
  3. Estimated fitted out cost of SGD 50 mil
  4. Anchor shopping mall in the west. It should have a good catchment of NUS, Singapore Poly, Ngee Ann Poly and SIM students not to mention local residents.
  5. 6 storey
  6. Will be opening in 2 phases with the first phase contributing in first half this year (2011)
  7. Purchase price is SGD541 mil
  8. Will be fully funded by SPH equity although it looks as if it is funded by debts currently.

Expensive Winning bid

The purchase price is SGD 541 mil. This winning bid is so far higher than the next highest bid at SGD382 mil!

At this price, inclusive of fitting out, the bid works out SGD 3,003 psf of retail NFA.

How expensive is this?

  1. Ion Orchard: SGD 3,800 psf
  2. Bishan Junction 8: SGD 2,306 psf
  3. Serangoon Nex: SGD 2,167 psf
  4. North Point: SGD 2,129 psf
  5. Causeway Point: SGD 1,706 psf
  6. Paragon: SGD 2,789 psf
  7. Tampines Mall: SGD 2,353 psf

Estimating Yield on Property

What we do know is that it depends very much on how much retailers will pay for renting this.

  1. The average mall rents for $10 – $13 psf
  2. The good mall rents for $15 – $18 psf

So SPH is aiming for an area of $18 psf which is really pushing it. At $352 mil, Frasers should be bidding for a 6% net property yield thinking they can rent it for $15 psf.

What SPH is looking for at $541 is a yield of only around 4.8%.

Assuming that SPH owns 60% of this and it is fully funded by equities, the full year contribution would be SGD15.5 mil. If they failed to reach this it will even be lower at SGD 10 mil.

If they leverage up by using debts by 50%, their yield could be 9.6% and SGD 31 mil.

If you are thinking this would diversify away the risk from main business, this 10 mil 31 mil numbers is less than 10% of their $400 mil dividend payout.

Another Paragon?

SPH is thinking they have the Midas touch as with Paragon and can improve upon it. They bought Paragon when people think it is overpriced and proceed to grow it 8% per year since their acquisition in 1997


I am starting to wonder whether this is the right approach SPH should take. They seem to have the government mentality of grab it at all cost, hence the aggressive bid.

Clementi Mall might worked out, but if all subsequent investments are as this then as shareholders do we inevitably become buyers of overpriced malls with low yields? Only time will tell.


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Wednesday 20th of April 2016

Will it be possible to do a review of this purchase after 5 years?


Wednesday 20th of April 2016

Hey Teru, I could probably do this. Do remind me if i missed this out!


Tuesday 29th of March 2011

Hi Drizzt thanks for your informative article.

I re-examined SPH and I actually am warming up to their property strategy (I incorrectly assumed that they were pouring more money into property development i.e. Sky@Eleven) vs acquiring property for rental.

I still love their core business which makes up most of their revenue. I am quite impressed with what they did with Paragon. Hopefully, management can apply what they learnt into making Clementi Mall a success.

I frequent Clementi quite a lot and happen to think its in a really good location. I will be re looking the fundamentals and might invest in SPH if the opportunity arises.

Thanks for your articles!


Tuesday 29th of March 2011

hi juno, thanks for the feedback. do let me know if u have any concerns about sph. good to explore together. cheers.


Sunday 27th of March 2011

Hi Drizzt,

Like the general concensus I find it small too... hopefully in the near future SPH can think of creative ways to increase its NLA.. well I will be bringing my collegues to makan @ clementi mall nxt support...hahaha and yes u can probably guess it..I am an SPH shareholder too..



Saturday 26th of March 2011


I stay in the clementi area , thus i pass by the clementi mall everyday while going to school. I was rather disappointed when i first saw the clmeenti mall as it was much smaller than i expected. However, the crowd so far is not bad even on weekdays. i will be constantly monitoring the situatiuon since i am vested in sph & hopefully, the small size of the mall wun be a big problem.

regards B


Sunday 27th of March 2011

hi B, good to see you here. I hope it doesn't give you the impression such as malls like sun plaza and hougang mall haha!

Hougang Mall is small really, but you can see the big difference what a good manager vs a manager that is inexperience in this. It brings a whole lot of vibrant life to the shopping mall and rightly so if they decide to raise rent. There is just no color in the old Hougang Mall


Saturday 26th of March 2011

News like these doesn't hurt.

The Clementi Mall 100% leased

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