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Tuesday, November 6, 2007

SP Setia Vietnam township to contribute 10% to net profit

KUALA LUMPUR: SP Setia Bhd expects its RM2.1bil township, EcoLakes at MyPhuoc Industrial Park in Binh Duong province, Vietnam, to contribute to 10% of net profit by 2010.

Chief executive officer and group managing director Tan Sri Liew Kee Sin said via a tie-up with state-owned conglomerate Becamex IDC Corp, SP Setia was the first developer in Vietnam to build an integrated township on 500 acres.

“We hope to set a foothold in this growing market where property prices are higher compared to Malaysia, so we can hope for higher margins as well,” he told reporters after the company's EGM and a signing ceremony yesterday.

At the ceremony, SP Setia inked an agreement with Aseambankers Malaysia Bhd and United Overseas Bank (M) Bhd for the proposed issuance of RM500mil nominal value redeemable serial bonds with 168,151,302 detachable warrants (RSB).

Aseambankers is the principal adviser and lead arranger while the joint lead managers are Aseambankers and UOB.

Left to right: UOB Bank (M) Bhd CEO Chan Kok Seong, SP Setia Bhd CEO and group MD Tan Sri Liew Kee Sin, Maybank Group deputy president and CFO Datuk Mohammed Hussein, SP Setia Bhd chairman Tan Sri Abdul Rashid Abdul Manaf, Aseambankers CCO Tracy Ong and Pacific Trustees CEO Wong Siak Nyen.

The RSB, to be fully subscribed by Aseambankers and UOB on a bought deal basis, would be issued at a discount to its nominal value in two tranches of RM250mil each, with a tenures of three and five years respectively. The coupon rate is 2% per annum payable semi-annually in arrears.

Upon issuance of the RSB, the warrants will be split from the bonds and offered for sale to the existing shareholders of SP Setia on a renounceable basis of one warrant for every four existing SP Setia shares of 75 sen each.

According to Liew, the RSB is not only to enable SP Setia to raise the requisite capital to fund company's expansion, but also reduce financing costs as some of the existing bank borrowings were procured at higher interest rates.

“This would allow us to diversify our funding sources and lock in fixed interest rates to rebalance our current financing portfolio, which is primarily based on floating interest rates,” he said, adding that the RSB would also enable SP Setia to plan its cash flow requirements.

Of the RM500mil to be raised, RM200mil would be used to repay existing borrowings, RM298.5mil to finance operating expenses, capital expenditure and working capital needs while RM1.5mil is set aside for expenses incurred in the corporate exercise.

“Besides focusing on the mixed development in Vietnam, the exercise would also allow SP Setia to embark on commercial developments such as Setia City in Shah Alam, Setia EcoCity in Johor Baru and luxury projects such as Duta Grande and Setia Sky Residences to further boost its strong and steady earnings base,” Liew added.

Along with the bonds issuance, SP Setia has also proposed a one-for-two bonus issue in order to increase the company's capital base and to better reflect its current and future scale of operations besides rewarding its shareholders.

On completion of the bonus issue and assuming full exercise of the warrants, SP Setia's issued and paid-up share capital will enlarge to about 1.2 billion shares, equivalent to RM882.8mil, from 672 million shares, or RM504.4mil.

RAM Rating Services Bhd has assigned a long-term “AA3” rating to the RSB, which indicates a high safety for timely payment of interest and principal.

By The Star (By Laalitha Hunt)

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