S P Setia: Merger with Sime Darby property arm mere speculation

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KUALA LUMPUR: S P Setia Bhd said reports relating to a potential merger of the property developer with Sime Darby Bhd’s property arm is mere speculation, and that the company is not privy to the details of the rumoured corporate move.

“It’s just speculation and we don’t know the details, so it is very difficult to comment. If there is any kind of corporate activity, the board will deliberate and then we will make a statement on it.

“Other than that, we read it from the paper, just like you,” acting president and chief executive officer (CEO) Datuk Khor Chap Jen quipped at a press conference after the group’s annual general meeting yesterday.

The Edge weekly had reported on March 16 that a proposal for Sime Darby (fundamental: 1; valuation: 0.9) to buy Permodalan Nasional Bhd’s (PNB) stake in S P Setia (fundamental: 1.4; valuation: 1.2) has been put forward to the relevant parties. However, it is not clear whether PNB, Sime Darby and S P Setia are receptive to it.

Previously, a local daily reported that the senior management of S P Setia had mooted for Sime Darby Property Bhd to acquire the former. It was said this was brought up by the S P Setia’s management last year, to PNB and Sime Darby.

According Bursa Malaysia filings, PNB had a 51.18% stake in S P Setia as at Jan 6, and a 7.89% stake in Sime Darby.

The report, quoting unnamed sources, said the idea for Sime Darby Property to acquire S P Setia was mooted to resolve a vacuum in leadership, caused by the departure of S P Setia’s former president and CEO Tan Sri Liew Kee Sin on April 30, 2014.

Looking ahead, S P Setia expects sales to be more robust in the second half of 2015, following the implementation of the goods and services tax (GST) from April 1, as the tax has caused some uncertainty in the property market. He noted that there was no pre-GST rush as buyers have postponed their big-ticket purchases.

“We foresee that about two months after GST, things will normalise. We think that in the second half of the year, purchases will pick up again, given the right products,” said Khor.

For 2015, he said S P Setia will be selective in its product offering, focusing more on landed products priced RM800,000 and below.

Of its sales target of RM4.6 billion for the year, S P Setia expects local sales to account for approximately RM2.8 billion or 60%, driven by its developments in Penang, the Klang Valley and Johor.

Khor said the property market in Johor is challenging and that “the game has changed” with the entry of Chinese developers.

“At the moment, there appears to be an ample supply of high-rises. For us, we have concentrated on landed properties. Long-term wise, depending on how the state government and Singapore work together, I think there will be a future for the property market there,” he said.

Meanwhile, the balance 40% or RM1.8 billion of its target will comprise sales of its foreign developments, supported mainly by its £8 billion (RM43.63 billion) gross development value Battersea Power Station project.


This article first appeared in The Edge Financial Daily, on March 27, 2015.