Monday, October 13, 2014

SP Setia-I&P merger?

By Sharen Kaur
Published in NST on October 13, 2014

BRAND BOOST: PNB considering tie-up to form country’s largest property player by asset value, sources say

PERMODALAN Nasional Bhd (PNB), the country’s largest fund manager, may merge SP Setia Bhd and I&P Group Sdn Bhd to revive the former, which is losing ground to rivals after more than 300 talents, including top executives, left, sources said.
“PNB is considering merging SP Setia with I&P to form the country’s largest property player by asset value and enlarge its product offerings. It will be a good marriage as SP Setia focuses on premium properties while I&P is a township developer, offering medium- to low-end houses,” one of the sources said.
As at August 31, SP Setia has 33 ongoing projects and 1,852ha of undeveloped landbank. The gross development value (GDV) is RM93 billion, of which SP Setia’s effective stake is RM64 billion.
I&P, best known for its flagship Bandar Kinrara development in Puchong, Selangor, has 2,090ha in the Klang Valley and Johor Baru, with potential GDV of RM32.4 billion.
Sources close to SP Setia said the company “lost it” following the resignations of former boss Tan Sri Liew Kee Sin and other big guns, including acting president and chief executive officer Datuk Voon Tin Yow.
“The SP Setia brand is not as strong as it used to be. People are losing faith in the company. Most investors are seasoned players in the game and they know about the management move from SP Setia to Eco World Development Bhd (EcoWorld).
“That is why you see strong take-up rates in EcoWorld launches despite the expensive products. Its Eco Majestic project, although located far away in Semenyih, is doing well and this is because of the people, brand and township concept,” the source said.
EcoWorld is linked to Liew through his son, Tian Xiong, who is a director of the company. A majority of the staff and key executives who left SP Setia have joined EcoWorld.
“PNB raised its stake in SP Setia a few years ago thinking that it would grow into a bigger entity with several international projects. But the plan has backfired as the key players in SP Setia have left for EcoWorld,” another source said.
“The (potential merger) goal is not to sail the boat, but rather to help the boat sail itself. Knowing that SP Setia doesn’t have this high-calibre management, buyers have doubts on the company’s future projects, whereas for I&P, they don’t have that association. On its own, I&P is doing well and it is a strong brand,” the source added.
RHB Research analyst Loong Kok Wen thinks PNB may merge SP Setia with either I&P or Sime Darby Bhd’s property division, or both.
“(The plan is) to revive or re-strategise SP Setia,” she told Business Times.
Mercury Securities head of research Edmund Tham said it was possible and plausible to merge SP Setia and I&P.
“We are looking at synergy, combination of landbank, operations and management as the possible reason behind the merger,” Tham said.

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