Sensible move for SP Setia

Kuala Lumpur: It is cheaper to gain control of a listed company with landbank in Penang than buy large chunks of land in the island, analysts said.


Therefore, it makes sense for the likes of SP Setia Bhd to eye a stake in such companies as landbank in Penang is depleting and buying the plots there is not easy and cheap, they added.

"Having a stake in companies such as Eastern and Oriental Bhd (E&O) will directly give SP Setia access to present and future property projects in Penang," an analyst said when asked to comment on reports that major shareholders of SP Setia are keen to buy a stake in E&O.

He added that such interest has also put a spotlight on the value of reclaimed land and its potential development in the state.

For example, analysts cited that Ivory Properties Group Bhd reportedly will have to fork out about RM1 billion to develop 27.34 hectares (ha) and reclaim up to 14.17ha of land that it won via a tender from the Penang Development Corp last Monday.

E&O, one of Penang's top property developers and land owners, has some 200ha in Penang alone worth RM1.1 billion, according to information obtained from its annual report.

It also has sizeable landbank in Gombak, Ampang, Damansara Heights and other areas of Kuala Lumpur.

Analysts noted that several shareholders of E&O had been building up their stakes in the company between July 19 and July 22 2011, based on the latest announcements.

This could be an indication that something major is indeed happening in E&O, they added.

Singapore's GKG Investment Holdings Pte Ltd, controlled by Goh Geok Khim, bought 250,000 shares, rising its stake to 11.49 per cent.

Datuk Azizan Abd Rahman bought 100,000 shares in E&O to raise his stake to 0.5 per cent.

E&O is currently 17 per cent-controlled by managing director Datuk Tham Ka Hon and his spouse.

Business Times (BT) reported last week that major SP Setia shareholders planned to buy a stake from E&O shareholders.

SP Setia's three biggest shareholders are Permodalan Nasional Bhd with a 32.9 per cent stake, the Employees Provident Fund with a 14.47 per cent interest, and SP Setia president and chief operating officer Tan Sri Liew Kee Sin with 11.96 per cent share.

Meanwhile, Mah Sing group hinted that it would prefer to buy land in Penang instead of acquiring a stake in a listed firm with landbank there.

"We are open to opportunities that create value be they outright land acquisitions or joint ventures in Penang," group managing director Tan Sri Leong Hoy Kum told BT.