By Khairul Khalid
Voon Tin Yow
Analysts are concerned about the resignation of SP Setia’s acting president and CEO (chief executive officer) Voon Tin Yow, some believing that it might have a negative impact on the property developer’s stock price.
“The group has not appointed a permanent CEO until now which is disappointing. We believe until there is a clear direction of the company’s strategy and stability of key management at the top, the discount given on the stock might persist, if not widen despite the good fundamentals,” said a Public Bank analyst report.
Yesterday, the company announced that Voon has tendered his resignation and will be replaced by his current deputy Khor Chap Jen effective January 1st 2015. Voon replaced previous CEO Liew Kee Sin only last April.
Khor’s promotion to the hot seat will still be as acting president and current executive vice president Wong Tuck Wai will be his acting deputy president.
Voon’s predecessor Liew left SP Setia last April after 18 years with the property developer. He also sold all his remaining shares in SP Setia. Liew had announced his resignation in January 2014.
However, Liew remains chairman of the Battersea Project Holding Company Limited, at least until September 2015, at the request of SP Setia chairman Zaki Azmi to ensure continuity of the high profile project.
Battersea Project Holding Company is joint venture holding company formed by the project partners – a consortium of SP Setia, Sime Darby and Employees Provident Fund (EPF).
Voon a ‘wanted’ man, says ex-boss Liew
In an interview with business radio station BFM this morning, Liew said Voon had not told him where he is heading in response to a question about whether Voon is crossing over to Eco World, where Liew is now a director.
“A man like Voon, with so much experience, so much knowledge, is a wanted man by all other developers,” added Liew.
Commenting further, Liew indicated that he would not be surprised if Voon knocks on his door next given the length of time they had worked together for.
“We were together for 22 years,” said Liew. “We built an empire, we built Setia, we built our families, our kids know each other so well. We’ve been together for such a long, long time.”
However Liew added that he would have to ask Voon why he resigned and if something is amiss leading to his departure from SP Setia.
Waiting on PNB’s next move
A Kenanga analyst report also shares Public Bank’s concerns on SP Setia’s lack of stability at the top.
“We believe that this may cause more uncertainties with regards to the direction of SP Setia, which explains the recent sharp sell down. Going forward, the re-rating catalyst for the group lies with clarity of management’s direction and potential news flow involving Sime Darby,as speculated by the media,” said Kenanga.
RHB also believes that an M&A (merger & acquisition) or restructuring plan will be initiated by its major shareholder PNB (Permodalan Nasional Berhad) over the next six to nine months to re-strategise SP Setia’s market position, given the exodus of senior management and staff after Liew’s departure.
Alliance DBS highlights that SP Setia posted a weaker than expected performance for the third quarter of the financial year 2014 (3QFY14).
“3QFY14 profit grew 39% q-o-q (quarter on quarter) and 2% y-o-y (year on year) to RM103 million, taking profit for the first nine months (9MFY14) to RM274.4 million (-5% y-o-y) or 63% of our full-year forecast,” said Alliance.
SP Setia posted RM1.42 billion property sales in 3QFY14 (+99% q-o-q, -51% y-o-y), mainly due to its 40% share of Battersea Power Station’s sales of RM735 million. Unbilled sales stood at RM10.9 billion (2.1x FY15F property revenue) which will underpin its near-term earnings visibility.
Alliance attributes SP Setia’s sluggish 3Q14 numbers due to higher losses incurred at its JVs (mainly Battersea as profit is only recognised upon handover), losses at its construction division as well as a higher effective tax rate. The quarterly result was also affected by GST (goods and services tax) charges of RM11.3 million and expenses of RM9.7 million due to its long-term incentive plan (LTIP).
LTIP is a reward system that may not necessarily be tied to a company’s stock and its main objective is to improve long-term performance. To qualify for LTIP, an employee will usually have to fulfill various criteria to show that he or she has contributed to shareholder value.
One of the typical requirements of a LTIP is that it is usually conferred to executives who stay with the company for a predefined number of years.
According to TA Securities, the SP Setia recognised LTIP expenses and GST provision which amounted to RM41 million and RM32.6 million respectively in 9MFY14. Excluding these, YTD net profit would have grown by 13% and in line with its revenue growth.
Despite the ongoing managerial issues, most analysts are still positive about SP Setia due to its solid fundamentals.
“All told, we still favor SP Setia for its sizable and well-located landbank, consistent performance and good earnings visibility,” said Public Bank.
At 3.40pm today, SP Setia stock was down 6 sen to RM3.25.
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