Showing posts with label SP Setia. Show all posts
Showing posts with label SP Setia. Show all posts

Saturday, April 5, 2014

SP Setia and TRC

Sometimes a slight change in management would make you think. The first thing that you would want to follow through is what would the changes be. In a recent announcement, SP has just awarded contracts to TRC Synergy for its project next to Mid Valley, named KL Eco City.

To me and many, SP Setia is the most prominent Malaysian developer and sometimes, you do not want to associate with not so good names. If you noticed two mishaps last year, TRC was in both.

Is there anything within SP Setia that we do not know of?

Tuesday, June 25, 2013

Trading Thoughts: What's brewing at Salcon???

Now this is one company which should not be within the radar of a fundamentalist - hence defies what I practice. Its PE is about 25x or even more. Revenue trend is unsure. The only saving grace is that the share price of RM0.62 is currently below the NA price of RM0.80.

What causes the stock to have a recent uptrend or attracting some attention is the signing of contract with Eco-World Development ("Eco-World"). Most people know (or speculate) that Eco-World is the proxy to Tan Sri Liew who has his son as a director and several of his ex-partners from SP Setia. He is after all leaving SP Setia come 2015. Definitely need something to carrying his brand and cash he has gotten from his sale of SP Setia's shares.

Eco-World is also in a hurry as it has bought up land worth hundreds of millions from MMC and DRB-Hicom and one or two more if not mistaken. What is not said in the article if we turn it around is the deal with DRB-HICOM, where Eco-World is allowed to do staggered payment which is going to be beneficial to the latter. Why would Eco-World negotiate for staggered payment? Cashflow! From this term, Eco-World would need to be aggressive NOW, hence the major launches and hiring of staffs in a hurry. Now we know that the third, fourth and fifth payment is over the next three years (as below) which could become significant in terms how much in a hurry Eco-World must be to get as much as possible from launches.




Trying to piece up together - one of the ex-director in SP Setia - Datuk Leong Kok Wah is a director in Salcon.

Cashflow is fundamental to Eco-World, as through the namesake and people involved, I think selling properties is not going to be a big issue given the vast experience these group has. One should also note that some of these guys have sold SP Setia's shares to the tune of hundreds of millions. Eco-World may need a vehicle though. Salcon is one company which behind the scene, there are some very rich people. Look through the Chairman's CV (who owns the largest chunk) as well as the second largest shareholder. They will not have problems raising funds. On top of that, it is not controlled by one major shareholder - as below - which is attractive for any party as large as Eco-World.

I sincerely do not know what's happening but these trend and connection - be it they want us to know or just pure speculation, I definitely am not able to confirm.

But yet again, these guys behind Salcon are rich, they do not need or I would think even bother about the play. What Salcon needs though is the boost in its business as it has been struggling to grow - although some reports say that they are in the midst of building a decent concession business. This I am not in the know to evaluate.

Notice another thing, after all these while, until recently some of the directors have started to exercise their ESOS at RM0.50 - could there be something brewing?

Saturday, May 4, 2013

Moving from SP Setia to Wing Tai

After holding SP Setia for 4 months, I have decided to sell the company at RM3.49, taking a profit of RM765.00 from this small shareholding.

If you looked through my previous postings on SP Setia, although I do like SP Setia, I did also mention of it being a short term shareholding. SP Setia will remain to be a great developer but the fact that Tan Sri Liew has been buying land (possibly through proxy like his son and friends) while diluting his stake in SP Setia probably convinced me to sell. I still do not think he is SP Setia, but the fact that it is a pure developer and me being not too comfortable with a full-fledged property developer at this stage, allows me to sell.

Yesterday, it was a small opportune time for me to pick up some of the stocks which may have dropped to their original level when I may have started to look some of the stocks with more in-depth.


This I believe, is due to the jittery effect of the general election which may chart the future of Malaysia when the market is reopened this Monday. Anyway, as always I have mentioned of non-government aligned stocks and I will still keep to that mindset. Time Dotcom and Malaysia Airport are not really government aligned stocks - they are businesses which are largely owned by GLCs. Time Dotcom is managed and to a large extent owned by a group of individuals who happened to run the company but they are majority owned by Khazanah. So is Malaysia Airport which is controlled by the government.

Anyway, over the past one month I have looked and relooked at a company called Wing Tai Malaysia. It is a decent developer with some slight diversification - fashion retailing. Currently, the contribution for the group is around two third property and one third retail. While I am ok with property business, I am as well attracted to its retail arm despite it being a smaller contributor. For its property, it is one of the more prominent developer in Singapore with some projects in Hong Kong and China, but these are held through different listed entity. Hence, it is not a newcomer when comes to property development. Much of its projects are medium and higher end in Malaysia now but its landbank in mainland Penang will cause it to build more affordable housing.

As for the retail business, this is where I think it will achieve more consistent results from. It has more than 10 brands under its arm and the more popular ones are TopShop and its joint venture into Uniqlo. Since 1 - 2 years ago, the government has done away with taxes on clothing and luxurious retail goods. This, I believe has cause brands such as H&M, Uniqlo, Debenhams to be aggressive in the Malaysian market - which from this is good for Wing Tai Malaysia. On its background, you would know that Wing Tai Malaysia was called D&P (Dragon and Phoenix). From my experience, it was a clothing manufacturer reinventing itself into brand retailer, which it to an extent has done decently well. This reinvention of itself makes me believe of the group, of its ability and I have decided to purchase 4200 units at RM1.89 per unit.

You can look at my update on my portfolio here.

Wednesday, February 6, 2013

I want to be an employee of SP Setia

I would love to be an employee of SP Setia, if I can get a job there but if I am an investor (which I am) I may think again. Why?

Well, I leave it late to comment on this but the full proposal came yesterday, and here it is. It is basically a free share award (up to 15%) for the employees which also includes the directors of course. The keywords are "no consideration" and "in recognition of loyalty". If you are to buy loyalty, and that affects the shareholders - then forget about loyalty!


I am not against rewards at all, but reward in a proper manner - cash and remunerations in other forms.

Here are the impact to the shares...According to its current price of RM3.13, the impact can go to as high as RM1.15 billion in value over 4 years - for a property company which is usually heavy with assets? Hello, it is not a services company such as IT, investment banks, pharma research etc...For a property company, land assets, market conditions presides over others. The 15% is on top of salaries and other expenses - fyi! Even for a top investment bank like Goldman Sachs, you know how much investors would jump over a 15% free share award over 4 years? The CEO of Goldman would not dare to come out with a plan like this even...You know when Steve Jobs proposed an option scheme for himself back in 2001 without the approval of the board, the media had a field day when the news appeared in 2006 - that was options, not free shares and it was way below 1% of total Apple's shares - for SP Setia, a property developer, not an Apple - total 15%!


What about its reasoning for the issuance? One of it is to provide valuable incentive to Employees without adversely affecting cashflow.

To me this is nonsense, firstly PNB bought a controlling stake over the property company afraid that it goes to the wrong hands. And it being afraid of the employees leaving, this kind of offer? This basically shows that the company has no understanding and respect over shareholders - minority that is.

If TSL can think that SP Setia is him and he is SP Setia, then that's really wrong!

Tuesday, January 15, 2013

Battersea and SP Setia

Read this article this morning and felt that I should share - do not know much about the Battersea project despite me having exposure to SP Setia as I was looking at its current Malaysian situation. The article started with positive remarks on the take up rate of the project but later warned that the overwhelming response could have its consequences.
Do weigh the investment yourself as it is a new unchartered territory for SP Setia and Sime Darby - real estate in London.

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via Bloomberg
Buyers reserved three-quarters of the apartments and townhouses to be built at the Battersea Power Station site in London in the five days since they were put on the market, according to the developer.
About 600 properties have been reserved in the Circus West part of the project since Jan. 9, the Battersea Power Station Development Company said today in a statement. They are the first homes to be offered as part of the station’s redevelopment.
A dwindling supply of homes for sale in areas such as Kensington & Chelsea is driving foreign and domestic buyers to look outside of neighborhoods traditionally considered prime. That’s prompting luxury-home developers to expand east toward the City of London and south of theRiver Thames, where major projects are under way in Battersea, Vauxhall and Nine Elms.
“Battersea isn’t prime central London and prices are already in excess of 1,000 pounds ($1,600) per square foot,” Camilla Dell, founder of broker Black Brick Property Solutions LLP, said by e-mail. “So investors are betting on prices reaching similar levels to prime, which is a gamble.”
Battersea Power Station, featured on the cover of Pink Floyd’s 1977 album “Animals,” has frustrated a series of developers since it closed more than 29 years ago. Malaysia’s SP Setia Bhd. (SPSB) and Sime Darby Bhd. (SIME) bought the site for 400 million pounds in July after its previous owner was put into administration.
The reservation fees were around 2,500 pounds for the apartments, which cost as much as 3.3 million pounds for a 2,383 square-foot (221 square-meter) property including outdoor space, according to Jo Eccles, managing director of broker Sourcing Property.

Nine Elms

The Battersea development is part of the Vauxhall Nine Elms Battersea Opportunity Area south of the River Thames and across from the Kensington & Chelsea and Westminster boroughs. It is London’s largest redevelopment area and includes a new U.S. embassy and an extension of the London underground.
Less than a mile from the Battersea station, Ballymore Group Ltd. is developing Embassy Gardens, where a three-bedroom apartment is being marketed for 2 million pounds, according to the developer’s website. Around 90 percent of the apartments offered so far have been sold, the developer said by e-mail today.
Berkeley Group Holdings Plc (BKG), the U.K.’s second largest homebuilder by value, is marketing penthouse apartments through its St. George’s unit, which is about 5-minute drive from the derelict power station.
“We are warning clients to be extremely cautious not to get swept up in the hype with the huge amount of development in the Battersea and Nine Elms area,” Eccles said by e-mail. “A lot of the prices per square foot being paid in a number of these developments -- for example St. George’s ‘The Tower’ in next door Vauxhall -- in our opinion just don’t stack up.”
Dell of Black Brick said she expects to see some “flipping,” of the properties, where early investors try to sell on their sales contracts at higher prices.
To contact the reporter on this story: Chris Spillane in London at cspillane3@bloomberg.net;
To contact the editor responsible for this story: Andrew Blackman atablackman@bloomberg.net

Friday, January 11, 2013

From Padini to SP Setia

I bought Padini less than two months ago. It was a good company and is still a good company. (Most of the companies I have bought I would consider them as good quality companies - if you happen to check their share price now against the price I sold, hence I am a poor seller.) However, for Padini, during the time I bought I was catching it at a downtrend, and happens to be I bought at almost its low for that short period. Now, after 2 sen dividend and capital gain of 4.5%, I decided to sell. Seldom do I do this, but I just would like to take profit on Padini.

Now, this is what I did on the same day - today.

Sold Padini and Bought SP Setia
I have mentioned of my liking for SP Setia although I have very careful thoughts on property companies. However, I still think that SP Setia is one of those premium developers which is able to turn a decent plot of land into a premium area. Now SP Setia is not just a Malaysian developer but it probably has bigger projects overseas such as the Battersea Station in London. (Do Google them if you do not know.)

In my previous article less than a month ago, I have mentioned of the scenario surrounding the share price and its warrants. I guess many did not really catch my reasoning as I did not reveal many things. Surprisingly to me this is one of the least read article despite me doing a lot of work on this.

However, as I am taking action, I am just going to say more of what I have found previously actually. Now look below and if you read again the previous article...


About 28 million of the warrant did not take up the offer - hence still in the free float
From the offer till todate (11 Jan 2013), there have been about 11.75 million warrants (those not owned by PNB) exercised to the mother share. This shows that only about 16.25 million shares are yet to be exercised. PNB itself has exercised some 79 million of the warrants thus far (see below). There is reason to believe that it will exercise the entire portion of warrants it owns by the conversion date - 21 January 2013 - as it bought many of the shares at the price of RM0.96 from shareholders. Yes, it controls the majority of the shares and whatever dilutions mainly affect itself, but still illogical not to exercise. Furthermore, I have no doubt PNB has the funds to do so.

Exercise of warrants by PNB

Full exercise of the warrants would have diluted the NAV of SP Setia but since it is now trading at around RM3.12 and the exercise costs of the warrants is RM2.99, I would think the dilution is not worrying. Anyway, as I have mentioned before in the previous article, the private placements and ESOS would have a bigger impact in terms of dilution. There are even bigger question marks in both the Private placement and ESOS themselves as the shares are being bought at RM3.95 while warrants bought at RM0.96. Assuming the private placements and ESOS (both 15%, hence totalling 30%) are issued at discounts of say 10%, some people would have gotten the shares at very cheap.

The discounts would have diluted the value of SP Setia's shares but I could not understand the reason for the sudden drop in share price to now RM3.12. If I am PNB, I definitely would not want to issue more shares at below my purchase price during the General Offer. However, we know that sometimes share price can be influenced to attract certain shareholders during exercise such as this - you know why most of the time I do not quite like private placements, rights etc now?

As a result, I think SP Setia's underlying value (I think the major shareholders would definitely know more) would have been much higher than RM3.12 which is why I am just buying 2,300 units. Not a lot.

Whatever your trade on these counters mentioned above are solely your own decision as I am just providing my opinion and I may be wrong. Please do your own research as some of my calculations may not be correct!

BTW, did not notice EPF just no longer become a substantial shareholder of SP Setia. I wonder why as EPF just had a big project with SP Setia - it no longer believes in SP Setia? Then such a big project as in the Battersea project where both EPF and SP Setia together invested a lot of money into it...how ahh? EPF surely is not the developer...

Saturday, December 29, 2012

SP Setia and its betrayal to its warrants

Warrants is a fantastic derivative which is often very useful to its master holders. Whenever there are rights issuance, the issuer will usually be provided with a so-called sweetener to sweeten the exercise. The calling of rights happens when companies are in need of funds injection and it is often the fear of the issuer that minorities may not take up the offer - hence a sweetener called warrants are usually provided for free. It is like free baby shares (if you are picking up the shares rights) which has some value when it is opened for trading.

As for investors who would like to buy or sell warrants, its volatility is much higher following its mother share especially those that are close to being in-the-money. It is often good for shares that have good potential, undervalued and the warrants are still having some time to expire. The same cannot be said for shares that have near termed expiring warrants though.

SP Setia is a wonderful share despite me not so interested in property stocks. It is probably the best developer in the country for now. The properties that it built probably has gained much premium to its original costs due to the brand and quality that are associated with the company - hence, it is one of those few developers that can actually be traded substantially above its NAV. Hence, with the brand over time, the share is good but in the short term, its shares can be traded at any price as there is less fundamental involved in short term trades.

The weird thing is that shareholders were offered at RM3.95 for each ordinary and warrants at RM0.96 by PNB and Tan Sri Liew together, (CEO of the company) sometime around February 2012. At that point of time, there was much brouhaha calling that the offer was way undervalued etc. etc. There were calls for much higher price. In fact, the independent advisor, call for shareholders not to take up the offer as the so-called RNAV (revised NAV) is actually RM5.00 - so why sell?

At the end, many sold anyway and PNB (the main offeror) and partners were holding more than 79% at that point of time. See below.


On the other hand, the independent advisor asked shareholders to sell the warrants as it was almost 10 months to its expiry. Hence, the offerors ended up holding up to 88% of the warrants which has an exercise price of RM2.99. From there we know that there are less than 25 million warrants shares in holdings of the minorities - important to know the number of shares left for trading (but of course PNB can still sell). I do not know where these group represents - probably they are the believer of SP Setia really worth much more than RM3.95.


Boy, could they be regretting? As SP Setia's shares did not perform to its expectations in terms of price. Financial results on the other hand, was actually good. And if you look at the price below, its share price had a surprising huge drop within say 15 days from around RM3.60 to RM3.00. Why a sudden lost of confidence in the stock? Why and who is behind the selling? It is not one of those who owns more than 5% as no major announcements were made. Tan Sri Liew leaving SP Setia - again the same old news regurgitated?

Trading of SP Setia - ordinary share

It is ok to hold on to a stock which is trading at RM3.10 now as there is no expiry for SP Setia. As long as its performance holds and the company sells more houses, it will be back to RM3.95 in no time, I believe. The one that is running out of time is the warrant which is due to expire in 21 January 2013 and left with few more days to be traded (3 Jan 2013). It suffered a similar huge drop (but much much higher percentage drop obviously) following the mother share. Time is running out, but the mother share is still trading at above the exercise price of RM2.99. Whatever it is, the holders still need to come out with cash and pick up.

Trading of SP Setia warrants

I know that the warrants have been largely traded and as at yesterday, it is still out of the money. In fact, the same warrant share was traded several times on the same day (look at the volume) during the last few weeks as traders like shares that are trading at low price. One thing I know, PNB has exercised some 79 million warrants shares (or even more). There is also a need to increase the public shareholdings to 25%. But you will never know, the share price could be left (if it drops to RM3.00) with the warrant shareholders holding a worthless paper at the end of the day.

Remember, at the same time with the drop in price, SP Setia is proposing for several things - private placements of up to 15%, ESOS of up to 15%. All these are based on last 5 days traded price prior to the exercise and with discounts. If I am an employee or someone who is taking up the private placements, obviously the lower the share price the better. Or could it be someone is buying the warrants...