THE BUZZ
In a joint press release yesterday, SP Setia (SPSB) and Sime Darby announced that a joint bid from SPSB and Sime Darby Property (SDP) has been identified by the Joint Administrators and Receivers as the preferred bid for the Battersea Power Station in London. At the same time, SPSB and SDP also entered into an Exclusivity Agreement with the Joint Administrators and Receivers on behalf of the owners of the property to acquire the site for GBP400m, or approximately RM2bn.
OUR TAKE
What the deal entails. Following the signing of the exclusivity agreement, SPSB and SDP have up to 28 days to conduct further due diligence and investigation, as well as negotiate the contract for the acquisition. SPSB’s move to acquire the 36-acre site is not surprising, considering that the group reportedly submitted two separate bids to acquire the site last year but both attempts were unsuccessful. We believe the proposed acquisition of the site was driven by SPSB’s aspiration to become an international property developer with an extended presence in Malaysia, Vietnam, Australia, China and Singapore. At this juncture, the equity share of SPSB and Sime Darby is still unclear, but with both companies having PNB as their largest shareholder, we believe it is likely that PNB will take up a direct equity stake in the potential JV. However, we do not rule out the possibility of other investors participating in the site’s redevelopment.
More on Battersea. The Battersea Power Station is a decommissioned coal-fired power station which sits on a 36-acre site on the south bank of River Thames in Battersea, an inner-city district of South West London. Since the station's closure, the site has remained largely unused, with numerous redevelopment plans from successive site owners failing to take off. SPSB and SDP's plans will involve the development of a sustainable multi use real estate regeneration project. The plans will involve preserving the facade of the historical power plant as well as its iconic chimney stacks. The two companies have also committed to the construction of a new underground station as part of the proposed extension of the Northern Line (part of the London Underground’s Tube network) that connects to the site. We gather that on top of the GBP400m price tag for the site, the developer is likely to have to contribute another GBP100m for the extension of the Northern Line. We believe the estimated gross development value (GDV) of the redevelopment has not been finalized, although it has been reported that the previous owner of the site has proposed a redevelopment project with an estimated GDV of GBP4bn.
Maintain Trading Buy. With the details of the joint bid and the redevelopment plan remaining sketchy at this juncture, we make no changes to our forecasts for SPSB. We maintain our Trading Buy recommendation, at an unchanged FV of RM4.34, which is equivalent to its 5-year historical average P/NTA.
Source: OSK
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