Now, let’s talk about the recent move to spin off some properties to become SPH REIT. There was some very misleading info and I thought it might be a good idea to clear it here once and for all.
SPH has stated that NET gearing would fall to 9.3% from 40.6%. That led some to think the interest cost might be lower now, and given such low gearing now, SPH could gear themselves up to 40% again without any new consequences to develop their malls.
First of all, I do not know how the management will utilize the proceeds, and whether they will pay down debts using the proceeds. But NET gearing fell simply because the cash level went up. Absolute debt remains the same and hence finance costs will remain the same.
Also, it is very unlikely SPH will increase gearing further to fund the mall ...
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