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
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