SP Setia to buy 3 PNB units?

SP Setia Bhd, the country's biggest property developer, may acquire three real-estate companies from a state asset manager, increasing sales and gaining financial backing from the government, says RHB Research Institute Sdn Bhd.

SP Setia will benefit if Permodalan Nasional Bhd (PNB) sells three property units it is already planning to merge to SP Setia, in which PNB already owns shares, said RHB Research, the brokerage unit of RHB Capital Bhd, the country's fourth biggest bank.

Adding Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd will enhance SP Setia's value and provide it with strong financial backing from the state for expansion, RHB Research said.

Malaysian developers' sales slumped last year as the country's exports fell, slowing economic growth, and the global financial crisis dried up credit.
PNB's three property units have combined annual sales exceeding RM1.31 billion, similar to SP Setia's 2008 figures.

SP Setia "could be pulled in to spearhead the merger in view of its strong brand name and market leader position in the local property industry", RHB Research said in a report yesterday. It maintained an "underperform" rating on the stock.

"A mega property company could also potentially benefit from merger synergies in terms of centralised procurement of construction materials and better negotiating power with contractors," it said.

Loans approved for residential property rose to RM3.74 billion in February, the first increase in seven months, central bank data show.

SP Setia chief executive officer Tan Sri Liew Kee Sin and company spokesman Diana Chin were not immediately available to comment when Bloomberg called the company.

PNB holds a 6.5 per cent stake in SP Setia as of January 30, according to data compiled by Bloomberg.

By Bloomberg