For a company that is in a pink of health, the lacklustre share price of S P Setia Bhd is perplexing but is being attributed to the departure of its president and CEO, Tan Sri Liew Kee Sin.
With Liew, who has been credited with building S P Setia into the most profitable property company in Malaysia, leaving at the end of the month, the one glaring gap in the company perceived by the market is the vacuum in leadership.
“I rarely get asked about S P Setia by fund managers these days, and – on the other hand – there are a lot of queries about Eco World Development Group Bhd and Mah Sing Group Bhd,” says one analyst who tracks the stock and the property sector.
“The market is worried about execution within the company once Liew leaves.”
Liew’s departure from S P Setia has long been priced into the stock and it had showed in the share price performance against the both the FTSE Bursa Malaysia KLCI and the property index over the past couple of years.
The under performance of S P Setia’s stock against the property index began in October 2012, some months after the takeover attempt by Permodalan Nasional Bhd (PNB).
In May last year, it started to lag behind the FBM KLCI. S P Setia’s share price performance was in step with the FBM KLCI and the property index for much of the time prior to that.
To date, the stock is 26% below the performance of the property index and about 24% below that of the FBM KLCI.
Realistically, that should not even be the case.
S P Setia has projects worth RM70bil in gross development value and RM2.6bil in cash. Coupled with unbilled sales of about RM10bil, the company’s cash generation and margins appear to be in a leadership position in comparison with the general property sector.
“The company is in the peak of strength and it can forecast what its profit is going to be for the next four years,” says a source close to the company.
“S P Setia has never been stronger.”
Liew’s departure from S P Setia has long been foretold and the group has appointed Datuk Voon Tin Yow in his place. As acting president and CEO, Voon has the tools to drive S P Setia forward as he was part of the team together with Liew that built S P Setia to where it is today.
Those who know Voon say he is as capable as Liew in running the show, albeit both of them have their different strengths.
Liew always credited his team when asked how he did the job at S P Setia.
For much of the part, SP Setia still has the people in the company that are more than capable of delivering the results expected by shareholders.
Lucrative projects
Although some 250 people have left the company for Eco World, S P Setia has not allowed itself to be hallowed. In fact, recruitment has been as furious as it has ever been to plug the gaps left by departures. Staff count still remains at 1,800 despite staff leaving for other companies, in particular Eco World.
As key personnel hopped over to Eco World, S P Setia has recruited people who have the calibre required by the company.
Although S P Setia has trouble filling in for people who have left in Johor, it has managed to replace people who have left in the Klang Valley and Penang.
That is important as it sits on large swathes of land and lucrative projects to deliver and build, and the company has key projects in those areas.
Voon will have the luxury of experienced layers of able lieutenants – from senior to mid-management – to help him run the company.
“There is no unit that is depleted. Voon and Datuk Khow Chap Jen are still there,” says a source.
“But there will be a period of adjustment that will take place after Liew leaves.”
The key thing, though, is whether Voon and his team will be allowed to do the job they see fit.
“Voon has been meeting with the top people at PNB and that will probably be to see how the transition takes off. Furthermore, I do expect him to be briefed on what they expect him to do,” says the source.
The question now is what will PNB do with S P Setia once Liew leaves? It’s common knowledge that both parties never saw eye to eye after PNB had to relinquish managerial control after taking over the majority of equity in S P Setia.
But after waiting for three years, and now seeing the value of their investment in S P Setia drop through the decline of its share price from the offer price of RM3.95 a share compared with its closing price of RM3.05 yesterday, it’s PNB’s turn to dictate things.
Turning S P Setia into a government-linked company (GLC) might not gel with the way things have been done at S P Setia. Pressure to conform with all things a GLC is will surely come but for those who have chosen to stick with S P Setia, the clash of corporate cultures will be discomforting.
“The best thing for PNB to do is actually allow Voon and his team the freedom to thrive in. The question is will they?” asks the source.
The best scenario will be for PNB to leave Voon to run the company but set out the key performance indicators that it wants achieved.
“They don’t have to run a company directly. This is a specialised industry and they should reward people for getting the job done,” says the source.
