Malaysia’s SP Setia raises $304 million from new share issue

The capital will be used partly for the development of the Battersea power station project in London, and the share sale will also result in a welcome increase in the free-float.
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Battersea power station: SP Setia and consortium paid $626 million last year to develop the site
<div style="text-align: left;"> Battersea power station: SP Setia and consortium paid $626 million last year to develop the site </div>

SP Setia, a leading property developer in Malaysia, has raised M$942.9 million ($304 million) from an earlier flagged share issue. The money will be used to fund existing and new projects, including the Battersea power station in London, which it is redeveloping together with the property arm of Sime Darby and the Employees Provident Fund (EPF).

The share sale, which accounted for 15% of the existing share capital, should also help address the company’s illiquid shareholding structure. Following the new issue, the free-float will increase to about 29.4% from just 18.8%, according to Bloomberg data.

SP Setia offered to sell 320.7 million new shares at a price between M$2.88 and M$3.00, which translated into a discount of 3.5% to 7.4% versus the latest trading price of M$3.11. The stock was suspended from 2.30pm Hong Kong time on Thursday to allow the deal to be launched slightly earlier than would otherwise have been possible.

According to a source, the deal attracted good interest from both domestic and international investors and was covered throughout the price range.

However, the price was fixed at the midpoint, at M$2.94, for a 5.5% discount versus the latest close. The discount versus the five-day volume-weighted average price was a slightly wider 6.9%.

According to a source, most of the demand came from long-only investors and the order amount was slightly skewed towards domestic accounts. But there was also good interest from international investors, including a few US-based accounts.

SP Setia’s share price fell significantly in November ahead of its removal from the MSCI Malaysia index, while the pending share sale also weighed on the stock as it adjusted to the dilution in earnings per share. As of yesterday, the share price was about 21.3% below where it was trading 12 months ago.

However, some analysts are now arguing that the stock is a good buying opportunity at these levels, and the improvement in the free-float should help increase the attraction even further.

Indeed, the stock trended higher when it resumed trading this morning and by 12.20pm today it had risen 2.25% to M$3.18.

SP Setia attracted the attention of global real estate investors in June last year when the consortium it formed with Sime Darby and EPF, a state pension fund, beat numerous other bidders, including Chelsea Football Club, to win the rights to redevelop the Battersea power station in London.

SP Setia and Sime Darby each own 40% of the company formed to carry out the project, while EPF owns the remaining 20%.

The partners paid £400 million ($626 million) to buy the site from the administrators of the iconic 1930s art deco landmark on the south side of the Thames and estimate that the gross development value will be close to £8 billion. The project, which will be a mixed residential and commercial development comprising private residential units, serviced apartments, office, retail, restaurants and bars as well as a hotel, will take about 15 years to develop.

The plans will preserve the facade of the historical power plant with its iconic chimney stacks.

The first phase, which is named Circus West at Battersea Power Station, was launched in January. It will include multiple residential buildings with a total of 800 apartments, a commercial podium with retail shops, restaurants, gym, pool, spa, theatre and office studios, and a new six-acre park open to the public.

SP Setia’s property developments in Malaysia range from self-contained townships to upscale boutique developments and shopping malls. The company is also active within construction and infrastructure, as well as wood-based manufacturing and trading. Battersea power station is its first project in Europe, but it is also involved in residential developments in Vietnam and Singapore.

Maybank acted as the sole bookrunner for the placement, which is the biggest equity transaction in Malaysia so far this year.

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