SP Setia; Hold; RM3.93
Price Target: RM4.50; SPSB MK

The independent advice circular in relation to PNB's MGO has been despatched, advising investors to  reject the RM3.95 offer for SPSB's shares as it does not reflect the fundamental value of the company (based on the independent advisor's estimated RNAV of RM5.00). However, investors are advised to accept the warrant offer price of 96 sen as it is deemed reasonable (although not fair) given its limited life (expiring on 21 Jan 2013) and high volatility amidst heightened economic uncertainties.

This concurs with our view that investors should hold on to SPSB's shares for better value (our TP of RM4.50 is based on 10% discount to our RNAV estimate of RM4.97), given improved clarity on management continuity (Tan Sri Liew Kee Sin will remain fully in control for the next 3 years) and strong growth potential. SPSB is on track to achieve its RM4b FY12 sales target (+21% yoy), with RM932m chalked so far for the first 3 months and a brimming launch pipeline. SPSB is still looking for more landbank (including government land redevelopment projects) - leveraging on its strong balance sheet (net cash) & backing from PNB.

The offer has turned unconditional on 2 Mar with PNB and Tan Sri Liew Kee Sin collectively holding 51.6% currently. We understand EPF and KWAP will likely maintain their 13.6% and 5% stakes respectively. PNB intends to maintain SPSB's listing status (potential placement should public spread falls <25%).

Key dates:
22 Feb: Receipt of offer document
2 Mar: MGO turns unconditional
5 Mar: Independent Advice Circular despatched
19 Mar: Closing date of offer

Source: HwangDBS Research 6 March 2012