Journey to Wealth
S P Setia - Positive indication from cash call?
News SPSETIA intends to raise up to RM1.0b from a 15% placement of new shares (max scenario: 322.69m) based on the illustrative price of RM3.19 (10% discount to its 5-day VWAP). The group is also terminating its existing ESOS to make way for new ESOS (up to 15% of its share cap). The expected completion is by 4QCY12.
Cash call rationales are for the 1) funding of its new projects/land commitments including Battersea, St Kilda@Melbourne, Qinzhou Industrial Park@China, 1HIH/MoH land swap deal, etc. (refer overleaf) and 2) improve the liquidity/public shareholding spread.
Comments We expect the share base to increase by 35% to 2.47b; this is more than the placement amount due to our maximum scenario** assumption that all ESOS/Warrants will be exercised. FY12-13E EPS will be diluted by 26% each to 14.4-17.1sen.
Based on 2Q12 balance sheet, the net gearing will fall to 0.19x from 0.32x. However, we are estimating a higher FY12-13E net gearing of 0.35-0.41x postcash call as the aforementioned projects require heavy financing.
Based on the shareholdings as at 27/7/12, PNB and Tan Sri Liew's shareholdings of 70.0% and 5.65% respectively will be reduced to 61.6% and 4.6%.
Although the EPS dilution appears significant, we believe it is necessary for the company to become a global property developer. In the last 12 months, the group has expanded aggressively to UK, Australia, China and Singapore while still landbanking locally.
We view this positively as it shows PAC's (PNB & Tan Sri Liew) intentions to maintain their stakes as major shareholders, albeit being diluted. The exercise should improve liquidity and reduce concerns of a delisting/privatisation.
Outlook We understand that the group will embark on a book building exercise to invite non-PAC/new shareholders to subscribe.
Forecast No changes to our FY12-13E estimates based on our assumed sales of RM3.8b-RM4.0b. Note that our estimates and per share estimates fully reflect the placement at maximum scenario.
Rating Maintain MARKET PERFORM
Although there are catalytic projects at hand, it appears SPSETIA is still finding it tough to command premium valuations without sufficient liquidity. Upon the successful placement, we will look to revisit our call with an upside bias on the back of its promising overseas expansion.
Valuation We have lowered our TP to RM3.90 from RM4.05 on a steeper discount of 29%* (21% previously) to a higher FD SoP RNAV of RM5.46 (refer overleaf).
Risks Sector risks and liquidity issues.
Source: Kenanga
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City
Created by kiasutrader | Mar 29, 2018
Kenanga Research - On our Portfolio - Parliament dissolution around the corner?
Created by kiasutrader | Mar 25, 2013
Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT
Created by kiasutrader | Mar 25, 2013
Pavilion Reit - Limited upside, earnings upside have been priced in HOLD
Created by kiasutrader | Mar 25, 2013
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Latest Videos
Apps
Top Articles
1
save malaysia!
Visa-free travel to China extended for Malaysians to 30 days
2
3
Koon Yew Yin's Blog
CPO price is rising rapidly as shown by chart below - Koon Yew Yin
4
Axcapital's investment blog
KAB - Executing its way to a record quarter. Could more Petronas contracts be coming?
6
7
8
BFM Podcast
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
