Sp Setia's Liew, PNB likely to stay out of share placement

PETALING JAYA: SP Setia Bhd president/chief executive officer Tan Sri Liew Kee Sin and Permodalan Nasional Bhd (PNB) are unlikely to be taking up shares in the proposed share placement exercise which the property developer announced on Monday.

An analyst told StarBiz that the proposal would be pointless if PNB and Liew were among those identified to take up the shares since among the stated objectives of the share placement was to increase liquidity of the stock.

“They've to do it because the stock's not liquid and the announcement has been expected for some time,” she said. PNB currently has a 51.63% stake while through Skim Amanah Saham Bumiputera, it has another 18.41% stake. Liew has a 5.65% stake, the Employees Provident Fund (EPF) has a 5.28% while Kumpulan Wang Persaraan has a 5.10% stake.

The share placement exercise comes on the heels of announcements by SP Setia of several multi-billion ringgit joint-venture projects, of which the most prominent would be the Battersea project in London announced early last month and the Qinzhou Industrial Park in south-west China announced in April.

Besides the proposed share placement, SP Setia has also proposed a new employees' share option scheme (Esos) of up to 15% of the issued and paid-up share capital of the company while proposing the cancellation of the existing Esos.

SP Setia and PNB were not able to reply to further queries on the proposed share placement exercise at press time.

Meanwhile, a Sime Darby Bhd official said the company had no plans to do a cash call at the moment. “Balance sheet-wise, we're in good shape,” she said. Sime Darby has a 40% stake in the joint venture to develop the Battersea project, the EPF holds a 20% stake while SP Setia owns the remainder stake.

To recap, Maybank Investment Bank Bhd said in an announcement to the stock exchange that SP Setia was proposing a new issuance of up to 15% of the issued and paid-up share capital of the company or up to 322.69 million shares.

The exercise would raise a minimum RM957.4mil assuming the price of the placement shares was fixed at RM3.19 per share based on a 10% discount to the five-day volume weighted average market price and a minimum take-up rate of 300.11 million shares.

The proceeds would be utilised to part-finance the cost of land acquisitions and initial project development expenditure, to meet the general working capital requirements as well as to defray the expenses relating to the proposals.

CIMB Investment Bank Bhd said in a note that the impact of the placement would be slightly negative on valuations.

“We estimate the private placement will dilute revised net asset value (RNAV) by 3% to RM4.17 (per share) and financial year ending Oct 31, 2013 (FY13) to FY15 earnings per share (EPS) by 6% to 12%,” it said, adding that the Esos would be an important means of retaining and incentivising staff.

Affin Investment Bank Bhd analyst Isaac Chow said in a report that the proposal, while positive in the long-term, would dampen investors' sentiment of the company in the short term.

He said assuming all the shares were placed out at RM3.23, the placement would dilute its EPS for FY13 to FY14 by 7% to 8%.

Chow recommends that investors acquire the shares via the placement exercise rather than in the open market. He has put the “reduce” rating and target price (of RM3.60) based on 15% discount to RNAV under review.

SP Setia's share price closed two sen lower at RM3.49 yesterday.

By The Star