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S P Setia to be net cash entity after share placement

SHAH ALAM: Property developer S P Setia Bhd will be a net cash entity upon completion of its share placement to existing major shareholders. The exercise is expected to raise some RM1 billion to finance the company’s existing and future projects.

Based on the expected proceeds of RM1 billion and S P Setia’s cash pile of RM1.06 billion at Oct 31 last year, the developer will have a cash pile of RM2.06 billion versus debts of RM1.64 billion.

This translates into net cash of around RM420 million or 41 sen a share.

Last month, S P Setia announced its plan for a placement of new shares to major shareholders. The company is also doing a bonus issue of new units on the basis of one bonus share for every two units held.

The share placement of up to 15% of the company’s issued share base will involve three major shareholders in S P Setia, ie Skim Amanah Saham Bumiputera (ASB), under the banner of Permodalan Nasional Bhd, Employees Provident Fund (EPF), and S P Setia president and CEO Tan Sri Liew Kee Sin.

ASB is the largest shareholder in S P Setia with 20.12% while EPF has 14.47% and Liew, 11.96%.

Money raised from the placement will be used for projects, namely the KL Eco City within the Abdullah Hukum enclave, the Setia City development in Setia Alam and the Futon Lane condominium project in Melbourne, Australia, which collectively have a combined gross development value (GDV) of RM12.5 billion.

S P Setia will also earmark a portion of the placement proceeds for future expansion plans, which may include a land-swap deal to acquire 16ha (40.22 acres) of prime land in Bangsar from the government in exchange for the company building a new integrated health and research facility within a 22ha (55.33 acre) tract in Setia Alam for the government.

Other than Malaysia and Australia, the company also has property projects in Vietnam and China.

Speaking to reporters after the company’s shareholders meeting yesterday, Liew said SP Setia had unbilled property sales worth some RM2.4 billion.

”We guarantee we can do RM3 billion worth of property sales in financial year ending Oct 31, 2011 (FY11),” Liew said, adding that “this year’s profit will be better”.  

He indicated that the developer had locked in RM737 million worth of transactions in FY11’s first quarter ended Jan 31.

Bloomberg consensus forecast indicates that the company will post a net profit of RM266.05 million on revenues of RM2.02 billion in FY11.  

In FY10, S P Setia’s net profit rose 47% to RM251.81 million while revenue grew 24% to RM1.75 billion.

The RM3 billion sales target is a 30% increase from the RM2.31 billion achieved in FY10 when sales grew at a bigger quantum of 40% from RM1.65 billion in FY09. S P Setia has an undeveloped landbank of some 1,480ha in Malaysia, Vietnam, China and Australia.

On the share placement, Liew said the exercise would help the company raise funds with minimal dilution to the share capital of the company. He said the exercise would be undertaken via a book-building process where the company was expected to engage some 30 global funds in a road show.

As such, the price of the shares to be placed out and the future shareholding structure of the company could not be determined at this point in time. The share placement and bonus issue are due for completion within the first half of this year.

Shares in S P Setia declined six sen to close at RM6.10 yesterday for a market capitalisation of RM6.22 billion.

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