Hot on the heels of the land disposal to Mah Sing Group Berhad (500 acres for RM392m in June), SP Setia announced that it is selling a 959.7-acre plot of land in Johor to Scientex Lestari Sdn Bhd (subsidiary of Scientex Berhad) for RM547.7m. Combined, the two deals are expected to monetize about RM940m to the Group. To recap, this latest deal is the same that was initially agreed back in May 2021 but then terminated due to non-fulfillment of a condition precedent. We understand that the condition precedent has now been satisfied, with the deal likely to proceed without any hiccups. Upon completion, the Group is expected to realize gains of approximately RM438.3m, which is estimated to increase its net assets and cash position by RM320.3m and RM441.4m respectively. We are positive with the Group’s commitment to bring down its debt load. To recap, the Group aims to lower it to 0.5x by end-FY23, which among others will be supported by sale of non-core assets such as land and investment properties (with estimated RM5bn total value). The deal is expected to be concluded in 2QCY24. All told, we keep our earnings estimates for now pending completion of the deal. Maintain Outperform and TP of RM0.95 pegged at c.60% discount to book value.
Source: PublicInvest Research - 6 Jul 2023
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