Comprehensive Analysis of SP Setia’s Strategic Moves and Financial Outlook

Date of Report: December 20, 2024

Broker Name: Maybank Investment Bank Berhad

Introduction

SP Setia, a leading property developer in Malaysia, is making strategic moves that promise to enhance its financial stability and growth trajectory. Maybank Investment Bank Berhad provides a detailed report on SP Setia’s latest land sale in Iskandar Malaysia, its financial forecasts, and the potential impact of these developments on its future performance.

Land Sale in Iskandar Malaysia

SP Setia (SPSB MK) has successfully secured a land sale in Taman Pelangi, Iskandar Malaysia. The 5.99-acre freehold commercial land, valued at MYR156.8 million, was sold at a price of MYR600.90 per square foot, a 20% premium over its external valuation. This strategic sale, expected to conclude by the first half of 2025, will bolster SP Setia’s balance sheet and aid its upcoming projects in Australia.

Positive Financial Implications

The land sale is anticipated to reduce SP Setia’s net gearing ratio to 0.34x post-sale, down from 0.35x at the end of the third quarter of 2024. This financial maneuver allows for strategic investments, debt reduction, and capital for future projects. Consequently, the FY25/26 earnings forecasts have been adjusted upwards by 25.7% and 1.9%, respectively, reflecting a net land sale gain of MYR107.8 million.

Outlook and Future Projects

SP Setia’s outlook for FY25-26 remains positive, with its industrial parks poised as key growth drivers. The company’s stable township developments and international ventures, particularly in Australia, are expected to contribute to its >MYR700 million net profit target by FY29. Furthermore, SP Setia plans to list its investment properties by the second half of 2025, which should further solidify its market position.

Financial Performance and Market Perception

SP Setia’s share price has been set at MYR1.35, with a 12-month price target of MYR1.64, marking a potential upside of 21%. The company has a strong market presence, with a market capitalization of MYR6.6 billion and a free float of 72.1%. Major shareholders include Bumiputra Investment Foundation, Permodalan Nasional Bhd., and Kumpulan Wang Persaraan, holding 21.8%, 21.6%, and 8.9% stakes, respectively.

ESG Initiatives and Corporate Governance

SP Setia is actively addressing environmental, social, and governance (ESG) issues. The company scores 57 out of 100 in ESG assessments, with initiatives such as Setia eGreenLiving to drive energy efficiency and reduce carbon footprint. The company is committed to reducing Scope 1 and 2 carbon emissions by 45% by 2030 and 70% by 2040, relative to a 2023 baseline.

Quantitative and Qualitative Parameters

The company’s quantitative ESG score stands at 50, while qualitative parameters score 67, reflecting its well-established ESG framework. SP Setia’s efforts in ESG are further supported by a sustainability committee led by independent directors, and senior management salaries are linked to fulfilling ESG targets.

Conclusion

Overall, SP Setia’s strategic land sale in Iskandar Malaysia and its strong financial outlook position the company favorably in the real estate market. With a robust approach to ESG and corporate governance, SP Setia is well-equipped to sustain its growth momentum and achieve its ambitious profit targets.