CGSI Research said the group has two more transactions for the sale of land, collectively worth RM324mil.
PETALING JAYA: S P Setia Bhd, in which Permodalan Nasional Bhd has a controlling stake, continues to reduce its debt by disposing of non-strategic land and unsold property.
The group has two more transactions for the sale of land, collectively worth RM324mil, said CGS International Research (CGSI Research) in a note yesterday.
One will be recognised as earnings for the fourth quarter of 2024 (4Q24) and the other in the first half of this year.
The property developer is also deleveraging by spinning off recurring-income assets via the listing of a real estate investment trust (REIT).
The management expects the listing of the REIT to be completed by 1Q26.
“Based on assumptions of a RM1.5bil valuation and a 40% to 50% retained stake, we estimate the REIT listing to generate proceeds of about RM600mil to RM750mil, bringing down gearing to 0.32 times by the end of 2026 .
“These initiatives would lower its gearing, thus contributing to earnings growth for 2024 to 2026,” the research house said.
During the research house’s Malaysia Corporate 2025 event on Jan 8, S P Setia noted that it is confident of exceeding its 2024 sales target of RM4.4bil, with RM3.2bil already achieved in the first nine months of 2024.
While still expecting resilient sales from township projects, the developer’s management foresees stronger traction for industrial-property sales this year.
This would be driven by accelerated growth from three key industrial projects – Setia Alaman, Tanjung Kupang and Setia Fontaines – with a combined gross development value of RM14bil across 1,029 acres of land.
The management highlighted that about RM600mil of sales of industrial properties from Setia Alaman will be booked as earnings this year upon obtaining development orders.
“The group is also close to announcing several new projects via multiple joint ventures for the Tanjung Kupang Industrial Park in Johor.
“While the industrial park may face challenges from US restrictions on exports for chips for artificial intelligence, given the focus on data centre players as potential key clients, we believe it can be cushioned by robust demand for industrial properties in Johor, driven by the Johor-Singapore Special Economic Zone,” the research house said.
CGSI Research lifted its 2024 to 2026 core earnings per share forecast for S P Setia by between 1% and 4% on higher sales and margin assumptions as well as the enlarged share base.
Following the earnings revisions, its target price was also lifted to RM1.45 per share.
“We reiterate a ‘hold’ rating as we believe most positives are priced in for now, as depicted by its 2025 price-earnings ratio of 20.9 times – higher than the normalised sector average of 14.5 times.
“Recall that the stronger earnings growth in 2023-2024 was buoyed by land sales totalling about RM1.7bil,” the research house said.
