Journey to Wealth
S P Setia - Battersea acquisition done!
News The JV Co (SPSETIA, SIME DARBY, EPF) has completed the proposed acquisition of the Battersea Power Station site. The GBP400.0m (RM2.0b) acquisition will be financed by a 60:40 debt-equity ratio.
Target 1st Phase launch size is a GDV of GBP1.0b (RM5.0b) featuring 800 apartments above a commercial podium (110k sf) based on an ASP of RM1100psf (refer overleaf). The toughest hurdles for approvals have passed and the official launch is on track for Apr-13.
Comments We are glad that the group has completed the acquisition quickly but it will have a NEUTRAL impact on the share price. Costing/margin details are still lacking while the news has also been widely anticipated.
The financing structure of 60:40 debt-equity is less aggressive than our initial 80:20 assumption, which will be positive for the project's margins. Recall that SPSETIA's portion of the land cost and initial 2-year development cost amount to GBP240m (RM1.2b), which may cause the net gearing to exceed 0.6x or above our comfort level of 0.5x.
Outlook The project will be marketed locally and overseas with previews of the project starting early next year. However, earnings delivery will take longer and will be lumpier towards the end of each phase as UK uses the 'completion method' of property sales accounting.
Recall the group has proposed a 15% placement to raise up to RM1.0b to fund Battersea and other sizeable projects like 1NIH/MoH land swap, Australian projects, Qinzhou Industrial Park (refer to 14/8/12 report). This will augur well for liquidity as the stock has yet to meet its public shareholding spread.
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 the maximum scenario.
Rating MARKET PERFORM ' Pending Review
Although there are catalytic projects at hand, it appears SPSETIA is still finding it tough to command premium valuations without sufficient liquidity. Ironically, the cash call may be a 'positive' indicator as it will aid with the liquidity if PAC (PNB and Tan Sri Liew) shareholdings are diluted. However, we are in the midst of reviewing our sector call to address Budget 2013 concerns.
Valuation TP of RM3.90 (under review) is based on a discount of 29% to the FD SoP RNAV of RM5.46.
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
2
3
4
save malaysia!
Visa-free travel to China extended for Malaysians to 30 days
5
6
Koon Yew Yin's Blog
CPO price is rising rapidly as shown by chart below - Koon Yew Yin
7
Axcapital's investment blog
KAB - Executing its way to a record quarter. Could more Petronas contracts be coming?
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....
