MORE PROBLEMS FOR SP SETIA
12 Jan 2015, KUALA LUMPUR: A high level initiative has started for a proposal for the property arm of Sime Darby Bhd to take over SP Setia Bhd.
The proposal was mooted by a few senior management of SP Setia about two months ago and conveyed to the top brass of Permodalan Nasional Bhd (PNB) and Sime Darby Bhd. PNB is the major shareholder of SP Setia as well as Sime Darby.
“So far, there has been no resistance to the proposal. It is not something out of the blue as this was talked about by the dominant shareholder.
“This time it is coming from the key people in SP Setia. They see a need for a strong leadership in SP Setia for the greater benefit of shareholders,” said a source.
The takeover is to resolve the current problem at SP Setia. The departure of its former president and CEO Tan Sri Liew Kee Sin on April 30, 2014 left a huge vacuum, which has gone increasing larger. The initial plan was to have the No. 2 and 3 – chief financial officer Datuk Teow Leong Seng and deputy president and COO Datuk Voon Tin Yow – at the helm post-Liew.
This did not happen. Instead, after Liew’s April departure, Teow, who was supposed to stay on until 2015, left on July 31, 2014.
Voon was left to hold the fort. It is uncertain how inclusive PNB was with Voon in its decision-making process. The fact that Voon also opted for an earlier check-out is telling.
An engineer by training, Voon, 57, assumed the position of acting president and CEO in transition on May 1, 2014. He was to stay on until April 20, 2015. He left at the end of December 2014. Although deputy president Datuk Khor Chap Jen is currently at the helm, taking over from Voon, the saga at SP Setia continues. Khor has been with the company about 20 years.
Speculation has been rife that PNB would appoint a new candidate from one of their companies but that has not happened. Among them was I&P Group Sdn Bhd CEO Datuk Jamaludin Osman, or one of PNB’s senior executives to replace Liew.
Since Liew’s departure, the company has grappled with a continuing series of outgoing leaders. Over the weekend, the company showcased some show houses as a preview into future launches in northern Setia Alam, part of SP Setia’s 2,525-acre flagship township. A Jan 9 press release said the company launched some landed properties in Setia Alam yesterday (Jan 11), its first property event since Liew’s departure.
Although the company is trying to go about with business as usual, PNB’s silence as what it plans to do with SP Setia has become deafening.
SP Setia has several projects on its books and need a strong leadership team to see them through, especially during challenging times.
Among them are the Battersea Power Station project in London where Liew is the key driver, and KL Eco City, in Bangsar, where SP Setia has a 50% interest.
“Battersea is a primary concern because they want to see it succeed and Malaysia coming out looking good,” said a source. Liew has always said it is a national project and he is the project’s best salesman.
As part of a massive regeneration project, Battersea was subsequently re-zoned as a Zone 1 location, a huge boost.
Liew is chairman of the Battersea Project Holding Co Ltd, the consortium leading the development of the London project. Teow, his former lieutenant. is chairman of Battersea Power Station Development Co Ltd. Other consortium members are Sime Darby and the Employees Provident Fund. SP Setia and Sime Darby have a 40% stake each with EPF, 20%. It is uncertain if Liew will continue to chair the consortium when his chairmanship concludes in September 2015.
The market has not been giving SP Setia its value since the departure of Liew. Prior to his departure, PNB had made a joint offer for SP Setia for RM3.95 per share. The offer was made with Liew.
Since then the market has not accorded the same valuation to SP Setia. Sentiments had been weak on the stock even before the current bearish sentiments had affected the sector as a whole. It closed at RM3.35 on Friday.
PNB has a plan to merge all its property companies under its stable and list it. However the plan had not taken off yet although there were consultants who had worked on it quite substantially, a source said.
“But SP setia is not part of the plan,” said a banker.
“Any corporate exercise between the two companies would need shareholders approval,” said the banker.
Another source said that even if PNB were to amalgamate all these property assets, it would not solve the issue of a lack of resources to manage the huge amount of assets.
“If PNB does decide to amalgamate all its property assets, it must find a vehicle. This should not be an issue at all,” the source said.
SP Setia seems to have “a better branding” than the other property companies in PNB’s stable,” the source said. “The most pressing problem in SP Setia is not land or sales. It is management execution and PNB’s perceived inertia.”
Property sector watchers may want to take a leaf from history. In 2005, PNB surprised the market when it took over Johor-based Pelangi Bhd. Two years later, the state-owned fund bought over Petaling Garden Bhd, three days after buying out Island & Peninsular Bhd. The move created one of the largest property portfolios for the fund. In 2006, PNB created a new vehicle Synergy Drive Sdn Bhd to park its plantation assets when it amalgamated Kumpulan Guthrie Bhd, Sime Darby and Golden Hope Bhd, in what was to be the largest merger in Malaysia’s corporate history
Since the takeover, PNB has yet to show how it is reaping the benefits.
You should be getting keys soon right?
