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Friday, June 8, 2012

UK project allows SP Setia, Sime to show off expertise

PETALING JAYA: Analysts are positive on the joint bid of SP Setia Bhd and Sime Darby Property Bhd being identified as the preferred bidder for the Battersea Power Station in the United Kingdom, as they say it is a rare opportunity for Malaysian companies to show off their expertise overseas.

Sime Darby Bhd was up 3 sen to RM9.71 on volume of 6.86 million shares yesterday while SP Setia was down 4 sen to RM3.75 on volume of 244,100 shares.

“That piece of land is in a very prime location in London.

“There were many big and reputable names which put in bids for the land. We must commend the deal-making capabilities of these Malaysian companies,” said a property analyst.

The Battersea Station is about 3.5km from the Houses of Parliament and has been vacant for almost three decades.

The 38-acre site sits on the south bank of River Thames. It was put on sale in February after its owners failed to pay lenders more than £500mil (RM2.47bil).

SP Setia and Sime Darby Property have entered into an exclusivity agreement with joint administrators and receivers Alan Bloom and Alan Hudson of Ernst & Young LLP, who acted on behalf of the owners of the property, to acquire the site for £400mil (about RM2bil).

Sime Darby and SP Setia will each hold 50% equity in the joint-bid consortium.

“The capital expenditure for the land will be about RM1bil per company if the equity stake is 50:50 between Sime Darby and SP Setia.

“Their gearing levels at some 10% each should afford both companies enough leverage for more bank borrowings,” said the analyst.

With the gross development value of some RM40bil, as disclosed to StarBiz by Tan Sri Liew Kee Sin of SP Setia, it was more than attractive enough for both companies to fork out RM2bil for the land.

As the land area is some 38 acres, the analyst said the project would easily be a revenue contributor for more than five years.

“It is difficult to predict (profit) margins at this point as London is an unfamiliar territory. Construction costs may also be higher,” said one anlayst.

He added that with SP Setia having done very well in Malaysia, it was about time that it expanded its brand overseas.

By The Star

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