Research firm positive over Battersea Phase 2 Project takeover

PETALING JAYA: Public Investment Bank Research is positive on the takeover of the commercial assets of the Battersea Power Station project by Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) from an associate company of Sime Darby Property Bhd and SP Setia Bhd, in which both companies hold 40% interest in.
Both groups could see their earnings lifted by at least RM400 million or at a 15% margin to its pre-tax profit should the proposal materialise, it said in separate reports.
The research house said that asset monetisation is part of the Sime Darby Property’s strategy of getting the best use of each piece of land while disposing non-strategic land. It has a target price of RM1.90 for Sime Darby Property.
“We still favour SP Setia for its sizable and well located landbank, consistent performance, good earnings visibility and decent dividend yield,” the research house said.
The price target for the stock was maintained at RM4.50.
The research house has given an "outperform" rating for both Sime Darby and SP Setia, supported by the view that the move will enable both companies to monetise their commercial assets more efficiently and redeploy the capital into subsequent development phases of the London project.
Earnings of both companies were kept unchanged at this point of time, as information remains sketchy due to the proposal still being in an early stage.
“We understand that residential pre-sales is now over 90% and the entire 470,000 sq ft of office space in the Battersea Power Station building has been let out to Apple. To recap, the Battersea Power Station project covers 42 acres and includes 3.5m sq ft of mixed commercial space, together with 4,364 new homes,” the firm said.
The two groups announced to the stock exchange that the Battersea Phase 2 Holding had entered into a heads of agreements with PNB and EPF to explore the terms of a potential sale on completion of the commercial assets currently being developed within Phase 2 of Battersea Power Station project, to a joint venture company to be formed between PNB and EPF.
Sime Darby Property's share price closed unchanged at RM1.59 with some 3.9 million shares done, while SP Setia closed up five sen to RM2.34 with some 4.5 million shares traded.