Maybank Research positive on Battersea sale to PNB, EPF

The company said in a statement that Elsa marks the launch of the Sime Darby Property Affordable Collection which include high-rise and landed properties priced below RM500,000, located within the Klang Valley

KUALA LUMPUR: Maybank Kim Eng Research is positive on Sime Darby Property and SP Setia’s proposed sale of their 40% stakes each in Battersea Power Station (BPS) phase 2 (BPS2) commercial spaces to Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF).

It said on Friday the potential sale proceeds from the sale of the power station building, estimated at 1.6bil pound sterling (RM8.8bil) -- 643mil pounds for Sime Property’s 40% stake) -- could be re-deployed to develop the remaining phases of the BPS project. 

“We maintain our earnings forecasts and RM1.58 realised net asset value (RNAV) target price (on an unchanged 0.55 times P/RNAV peg),” it said.  

On Thursday, Sime Property’s 40%-owned joint venture company, Battersea Phase 2 HoldCo, had entered into an outline heads of terms with PNB and EPF. 

Under the proposal, they parties would egotiate the terms of a potential sale, on completion of the commercial spaces under the BPS2 project, to PNB and EPF. 

The purchase price is subject to a due diligence exercise and will be paid in stages throughout the balance of the construction phase of The Power Station building. 

The purchase price shall be based on an agreed stabilised net property income,  capitalisation rate and/or such calculation that is to be mutually agreed. 

“We are positive on this deal as the sale proceeds could be re-deployed to develop the remaining phases (3 to 7) of the BPS project till e.2028. 

“This would help to lessen the capex burden for Battersea Phase 2 HoldCo amidst the Brexit uncertainty which could slow down the development pace of the BPS project,” it said. 

Maybank Research said construction of the Power Station building will be completed in late 2020. It comprises 25% residential (with 250 units of luxury apartments; of which 90% has been sold), 25% office space (which has been pre-let to Apple) and the remaining will be retail and leisure.   
“Assuming a pretax margin of 20%-25% as guided previously, we estimate profit from the sale to be RM584mil based on Sime Darby’s 40% stake in the project. 

“This profit would only be reflected in FY21 upon completion of The Power Station building. Next would be the definitive and binding agreements for the sale. Our RNAV estimate is unchanged at RM2.88 a share,” it said.
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