Kenanga Research said the planned project should be “sound”, but some details were unclear.
PETALING JAYA: S P Setia Bhd’s tie-up with Mitsui Fudosan (Asia) Malaysia Sdn Bhd for a residential project in Bangsar, Kuala Lumpur, is a positive development.However, the enhancement to the property developer’s valuation from the project will likely be insignificant.
Kenanga Research, in its report, noted the planned project, comprising residential towers with gross development value (GDV) of RM1.4bil on 2.67 acres in Bangsar, should be “sound”, but some details were unclear.
“We believe that the partnership is overall a positive as Mitsui has also been involved in several developments in the past, most notably the retail mall Lalaport Bukit Bintang City Centre which had a GDV of RM1.6bil,” the brokerage said.
“That said, it is uncertain the breakdown of share ownership between S P Setia and Mitsui, as well as the details of the land cost and land title,” it explained.
S P Setia recently announced it was partnering with Mitsui, which operates the Mitsui Outlet Park KLIA, in a joint venture to develop two parcels of 2.67 acres commercial land in Setia Federal Hill, Bangsar.
The development would comprise two residential towers with about 1,300 units. The first tower was expected to be launched in 2024.
Kenanga Research said given that adjacent high-rise units are generally priced at RM1,000 per sq ft, the price tag of around RM1.1mil per unit could indicate an estimated unit size of 1,100 sq ft.
Assuming the joint venture was on a 50:50 basis with a targeted completion of four years after launch, that is 2027, it said, the project’s potential contribution might only add one sen and 0.3 sen to its revalued net asset value per share and target price, respectively.
Kenanga Research maintained its “underperform” call on S P Setia, with an unchanged target price of 68 sen.
“We remain cautious on S P Setia due to its significant exposure to the high-end landed and high-rise residential segment, which is not highly sought after by buyers at present.”
The research house also noted the company’s high gearing and hence debt-servicing obligation amid a high interest environment and losses at its joint-venture projects.
Meanwhile, S P Setia appeared on track to hit its sales target of RM4.2bil for its current financial year ending Dec 31, 2023.
As at nine months ended Sept 30, 2023, its sales had already hit RM3.9bil, with local projects contributing RM3.37bil or 87% of total sales.
The property developer said the remaining RM523mil, or about 13%, was generated from international sales.
“The central region accounted for 54% of local sales, followed by the southern region with a 40% contribution.
“The group cleared completed inventories, with RM804mil sold during this period,” it said in a statement.
As at Sept 30, 2023, the group secured a total booking of RM450mil.
For the third quarter ended Sept 30, 2023, S P Setia’s net profit stood at RM51.8mil. Revenue grew 25% to RM1.08bil from RM860.9mil quarter-on-quarter.
During the third quarter, S P Setia launched a range of projects including RM498.7mil of landed properties in the central and southern regions and two-storey commercial retail and office units at the Setia Fontaines City Centre Business Hub in Penang.
“The take-up rate for these new developments has been encouraging, with a 97% occupancy rate observed in the new phase of landed residential units in Bandar Kinrara and about 60% of units sold in townships such as Setia Bayuemas and Setia Fontaines,” it said.
The group also expanded internationally by acquiring a prime land in St Leonards, Sydney, Australia.
“With a land area of 1,374 sq m, the acquisition marks the company’s first venture into New South Wales,” it said.
