Battersea earnings could be recognised by Q4 next year

Kwasa Land Sdn Bhd is a unit of the Employees Provident Fund

PETALING JAYA: Earnings from the sale of Sime Darby Property Bhd’s Battersea Power Station Phase 2 (BPS2) project to Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) could be recognised by as early as the fourth quarter of next year.

In a research report yesterday, Maybank Investment Bank Research (Maybank IB) said the deal with PNB - EPF was expected to be concluded by next month.

“Sale of BPS2 commercial spaces to EPF-PNB would be concluded by July 2018 with earnings to be recognised upon completion of the BPS2 construction works between the fourth quarter of 2019 and third quarter of 2020.”

Both SP Setia and Sime Darby Property have an equal stake of 40% each in the UK project, with the EPF holding the remaining 20%.

Maybank IB said the sale will allow the consortium to redeploy capital to the subsequent phases of the UK-based development.

“The selling price is estimated at around £1.608bil (RM8.59bil) subject to a due diligence exercise,” said the research house.

The BPS2 deal came under scrutiny earlier this week, following a report that quoted PKR leader Datuk Seri Anwar Ibrahim as saying that the Government would investigate the UK project as part of “dubious” investments made by the previous administration.

Anwar had told The Guardian that the Pakatan Harapan Government would have to relook and renegotiate the Battersea deal if there were any elements of wrongdoing as it involved state funds.

Following the report, both property developers saw their share prices take a hit, with SP Setia falling 7.81% or 25 sen to RM2.95 and Sime Darby Property sliding 6.2% or eight sen to close at RM1.21 on Tuesday.

In a joint statement on Wednesday, SP Setia and Sime Darby Property said the transaction, which was initiated early this year, was also to enable them to continue to reallocate capital to other areas of their development businesses.

“As previously assured by all parties, the decision to explore the potential reorganisation of ownership is purely an investment consideration initiated by the BPS board and management team, together with the EPF and PNB.

“PNB and the EPF view this as a strategic opportunity to secure ownership of a unique and iconic real estate asset which will be able to deliver sustainable income streams into the future to meet their respective income needs,” the property developers said in the statement.

Maybank IB, following a meeting with Sime Darby Property’s management this week, said the developer is confident on the sale completion of BPS2, as valuations are backed by market studies and due diligence.

“The selling price has yet to be finalised but it will likely be based on the current cap rate of 4.5% to 5%,” it said.