TA Securities has ‘buy’ call on SP Setia following merger news
KUALA LUMPUR: TA Securities has recommended a “buy” call on SP Setia Bhd shares, following news of its merger with I&P Group Sdn Bhd.
“We believe the merger would benefit both property developers as there will be synergistic values arising from the combination of landbank and staff strength,” the research house said in its latest notes to investors.
“We fairly value SP Setia’s shares at RM4.10, about 13 per cent higher than the last trading price of RM3.62,” it said.
TA Securities highlighted that the enlarged entity will have a combined landbank of close to 10,000 acres, with a total gross development value of RM122 billion and total revenue of RM5 billion.
After the merger, SP Setia would emerge the third-largest property developer by landbank in Malaysia, after Sime Darby Property (28,000 acres) and UEM Sunrise Bhd (13,000 acres).
SP Setia’s acquisition of I&P would expedite its aspiration to grow its market capitalisation to RM18 billion by 2021, from some RM10 billion.
Last week, SP Setia signed a conditional share purchase agreement with Permodalan Nasional Bhd (PNB) and AmanahRaya Trustees Bhd (as trustee for PNB’s unit, Amanah Saham Bumiputera) to acquire I&P for RM3.65 billion.
SP Setia also announced a rights issue of ordinary shares, a rights issue of new Class B Islamic redeemable convertible preference shares (RCPS-i B) and placement of new SP Setia shares. Each of these instrument would raise RM1.2 billion, making the funds total RM3.6 billion.
The rights issue of new shares is intended to be undertaken on a full subscription basis.
PNB and the funds under PNB’s management have provided an irrevocable undertaking to subscribe in full for their entitlement.
SP Setia has also obtained the irrevocable undertaking from PNB to subscribe for its entitlement of the RCPS-i B in full.
PNB shall also subscribe for additional RCPSI B not taken up by the other entitled shareholders up to an aggregate of RM340 million in value by way of excess application.