Thursday, October 13, 2011

What would S P Setia's Liew do next?

KUALA LUMPUR: Shares of S P Setia Bhd were marginally lower at midday on Thursday, Oct 13, as investors mulled over the next move by S P Setia chief executive officer Tan Sri Liew Kee Sin.

At midday, S P Setia was down one sen to RM3.86 while the warrants were unchanged at 87.5 sen which were lower that Permodalan Nasional Bhd's offer of RM3.90 for the shares and 91 sen offer for the warrants.

The latest development was on Wednesday when S P Setia said there were no competing offers for the stake in the company after the Sept 28 move by Permodalan Nasional Bhd to acquire the property developer.

UOB Kay Hian Malaysia Research said the market was awaiting Liew's decision on PNB's general offer proposal.

'The upcoming two weeks are crucial as the decision could be made anytime from now till Oct 28 when SP Setia's independent adviser (IA) is expected to release its recommendation to shareholders on whether they should accept PNB's GO,' it said.

S P Setia and PNB had recently issued a joint statement that it PNB's desire to retain Liew and S P Setia's management, while PNB's involvement would only be through board representation.

'We explore two outcomes: a) Tan Sri Liew stays on and does not sell any shares, and b) he stays on but sells part/all of his entire 11.3% stake. We reckon the market would be pricing a steeper discount to the share price if the second outcome materialises,' it said.

UOB Kay Hian Research said according to the Malaysian Code of Takeovers and Acquisitions, the offer price of a GO should be at the highest price paid in the six-month period prior to the GO. Bursa filings showed that in Apr 11, a separate fund under PNB's purview, had in fact acquired shares in S P Setia at a higher price which ranged between RM4.10 to RM4.20.

'While PNB's basis for offering the GO of RM3.90 is based on the highest price at which the triggering fund had acquired SP Setia's shares, it could potentially be argued that the highest price at which PNB, as the ultimate beneficial owner of the shares and as the offerer of the GO, acquired its collective stake in S P Setia, is in fact higher than RM3.90.

'After all, it appears that without counting the separate fund's stake in S P Setia, PNB may not have even triggered the GO ownership threshold,' it said.

UOB Kay Hian Research said it was maintaining a HOLD call on S P Setia with an interim target price of RM3.90 (takeover offer price).

'However, we believe the share price would probably retrace to our pre takeover target price of RM3.30 once the verdict is announced,' it said.

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