News The Secretary of State for Foreign and Commonwealth
Affairs of the United Kingdom of Great Britain and Northern Ireland has
accepted SPSETIA’s tender purchase of 3.08ac freehold land along Jalan Ampang
(i.e. Embassy Row) for RM295.0m (RM2,200psf). The land is currently occupied by
The British High Commission (refer overleaf).
Comments Project GDV of RM1.04b which will feature an integrated
commercial development; but more details will be provided later when approvals
(e.g. D.O.) are obtained. We believe the area can fetch decent plot ratios of
6x and project pretax margins of c. 20%.
Land price of
RM2,200psf is considered fair. Over the last few years, prime niche landbank
around KLCC (1-2km radius) with main road frontage has been transacted between
RM2,000-2,400psf. The land will likely be financed by 70:30 debt-equity
financing, which would increase current net gearing from 0.33x to 0.40x;
although still within comfort zone, the group is in the midst of its 15%
placement exercise to kick-start catalytic projects like Battersea.
Overall, Neutral on
the acquisition as the project’s earnings contributions will not be immediate
since launch is likelier in 2 years time while impact to RNAV is minimal as it
only increases our FD SoP RNAV by 2 sen to RM5.44.
Outlook The group has up till Apr-13 to complete their
15% placement. We can also look forward to the Battersea Phase 1 project launch
in Apr-13.
Forecast No changes to FY12-13E net profit, as project contributions
will only be material in FY14 onwards.
Rating Maintain MARKET PERFORM
Although there are
catalytic projects at hand, it appears SPSETIA liquidity issues are affecting
its share price negatively. However, downside risk is limited at the 6-year
trough of 1.3x FY13E PBV (-1.5SD).
Valuation Maintain TP of RM3.30 based on 39%* discount
on our FD SoP RNAV of RM5.44.
Risks Sector risks and liquidity issues. Delays in
the placement may affect project timelines.
Source: Kenanga
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