Key Developments and Strategies
De-Gearing Efforts and Non-Core Land Sales
SP Setia’s strategic de-gearing initiatives have borne fruit, driven by significant non-core land sales in the past two years. These transactions have bolstered the company’s financial position, reducing its net gearing ratio to 0.35x as of September 2024. This is a notable improvement from 0.41x in June 2024, bringing the company closer to its 2027 target of 0.30x.
In 2024, SP Setia completed RM888 million in non-core land sales, following RM836 million in 2023. Key disposals included a 6-acre parcel in Taman Pelangi for RM517 million. The company has RM453 million in unrecognised non-core sales, with RM296 million expected to be recognised in Q4 2024 and the remaining RM157 million by H1 2025. These disposals are critical for cash flow and balance sheet strengthening, although no further significant non-core land sales are anticipated in 2025.
Industrial Land Sales: A High-Margin Growth Driver
SP Setia is capitalising on high-margin industrial land sales. Unbilled sales stood at RM3.5 billion as of September 2024, including RM650 million from Setia Alaman Industrial Park. Additionally, RM500 million from anticipated Tanjung Kupang industrial plot sales is expected to contribute in Q1 2025, bringing cumulative industrial plot sales to RM1.2 billion. With net profit margins of up to 50-60% for direct industrial plot sales, these transactions are projected to contribute RM380 million in net profit, or 60% of the full-year forecast for 2025.
The Tanjung Kupang site, spanning 307 acres, is being developed into a managed industrial park featuring data centres, logistics, and warehousing facilities. Its gross development value (GDV) has surged to RM3 billion for 2025-2031, with a potential longer-term GDV of RM9 billion, given its strategic location near major highways and the Malaysia-Singapore Second Link.
Federal Hill Project: A Luxury Residential Success
The Federal Hill project, a joint venture with Mitsui Fudosan, has garnered impressive pre-launch demand. As of early January 2025, 300 out of 693 units have been booked, representing a 43% booking rate. The project is set to officially launch in February 2025, with management targeting a first-year take-up rate of at least 40%. Previous luxury launches, such as Avaland’s Aetas Seputeh, achieved a 50% take-up rate, underscoring strong demand in the luxury segment.
Setting Higher Sales Targets
For 2025, SP Setia is expected to set an ambitious sales target of RM4.7 billion to RM4.8 billion, up from RM4.4 billion in 2024. This will be driven by new project launches, including Phase 1 of Setia Federal Hill, Atlas Melbourne, and industrial developments in Tanjung Kupang and Setia Alaman.
REIT IPO to Bolster Financial Flexibility
To enhance its financial position further, SP Setia is preparing a RM1.5 billion REIT IPO, targeted for late 2025 or early 2026. The REIT will feature a diversified portfolio, including malls, offices, schools, convention centres, and hotels. By retaining a 40-50% stake, the company could raise RM750 million to RM900 million in cash proceeds. This aligns with SP Setia’s asset-light strategy and provides additional financial flexibility.
