Tuesday, 26 July 2011
SP Setia wants 100% KLEC
KUALA LUMPUR: Maybank Investment Bank Research is reiterating its Buy on SP SETIA BHD  and raise the target price to RM5 after it proposed to acquire the remaining 40% stake in KL Eco City (KLEC).
“We are excited on SP Setia's purchase of the remaining 40% stake in KLEC. This non-cash acquisition will immediately boost SPSB’s earnings by 0.6% to 1% and RNAV per share by 8.0 sen,” it said on Tuesday, July 26.
Maybank Research said all it would cost SP Setia would be 19.4 million new shares, which is a mere 1.1% increase of its existing share base.
“We upgrade our forecasts by 0.3-1.9%. Reiterate Buy with a higher RM5.00 target price (+24 sen; 10% premium to RM4.53 RNAV).
SP Setia proposed to acquire the remaining 40% stake in KLEC from Yayasan Gerakbakti Kebangsaan (YGK) for RM75 million.
Derived from a discounted cashflow valuation range of RM53 million to RM73 million, it said the RM75 million implied RM187.5 million equity value for the project.
The purchase price will be funded via a 19.4 million new share issuance (1.1% of existing share cap; RM3.87 issue price, 1% below Monday’s close).
YGK, a foundation owned by UMNO Youth, is established to administer funds for the eradication of poverty and enhance the welfare of the poor. The acquisition is expected to be completed by end-2011.
Maybank Research said apart from having a full control of KLEC, this non-cash acquisition will also save working capital for KLEC’s infrastructure works, CONSTRUCTION  of MOH buildings in Setia Alam and Fulton Lane in Melbourne.
“Elsewhere, SP Setia has thus far achieved a stunning RM1.9 billion sales in 8MFY11. This excludes RM1.6 billion to RM1.8 billion bookings/sales of KLEC’s strata and boutique offices as well as Residential Tower One, which could potentially boost SP Setia’s sales beyond its initial RM3 billion target for the year.
“We understand that SPSB intends to launch KLEC in August after the final approval from Unit Kerjasama Awam Swasta (UKAS) is obtained,” it said.