KEY INVESTMENT HIGHLIGHTS

• S P Setia results briefing
• New sales target maintained at RM4.4b
• Growing industrial property development portfolio
• Diversified assets for upcoming REIT
• Earnings forecast maintained
• Maintain BUY with an unchanged TP of RM1.67

We attended S P Setia 3QFY24 results briefing and came away the briefing feeling reaffirmed on the prospect for the company. Key takeaways from the briefing as below:

New sales target maintained at RM4.4b. S P Setia recorded total new sales of RM3.2b in 9MFY24 whereby 77% of the new sales contributed by property development while remaining 23% contributed by land sales. Meanwhile, management is confident that the company will hit the sales target of RM4.4b as the total new sales year-to-date surpasses RM4b. New sales momentum in 4QFY24 is expected to be supported by launches of projects with total GDV of RM1.97b. Meanwhile, Setia Federal Hill Phase 1 project (GDV: RM1.4b) will be officially launched in FY25 and that will support new sales growth in FY25.

Growing industrial property development portfolio. S P Setia is expanding its industrial property development as sales from industrial property were encouraging at RM368m in 9MFY24 against FY23 total industrial sales of RM189m. In view of the strong demand for industrial assets in Malaysia, S P Setia has identified three locations with total 1,029 acres of land for industrial park development (refer to figure 1). Notably, management is upbeat on Tanjung Kupong industrial park in Johor with potential GDV of RM1.87b due to its proximity to Singapore and Forest City. The industrial park is likely to include industrial properties and data centres.

Diversified assets for upcoming REIT. S P Setia is planning to list its investment assets as REIT to unlock value of its investment assets. Pre- IPO works for REIT was started in 1HFY24 and S P Setia is the midst of determining assets to be injected into REIT. We understand that REIT is likely to be a diversified REIT with school, office, mall, hotel and convention centre under REIT asset portfolio. The assets that are likely to be injected into REIT are Tenby Setia Eco Park, Tenby Setia Eco Gardens, Tenby Setia Ecohill, S P Setia Berhad Corporate HQ in Setia Alam, Mercu 2, Aspire Tower, Sutera Mall in Skudai, Medan Setia Alam, Lotus's Setia Tropika, Setia City Convention Center in Setia Alam, and Setia SPICE Convention Center in Bayan Lepas.

Maintain BUY with an unchanged TP of RM1.67. Post briefing, we make no changes to our earnings forecast for FY24F/25F/26F. Our TP for S P Setia is maintained at RM1.67, based on 60% discount to RNAV. New sales outlook for S P Setia is expected to remain stable, supported by launch of its township projects. Meanwhile, valuation of S P Setia remains attractive, trading at 55% discount to latest NTA per share of RM3.00. Hence, we maintain our BUY call on S P Setia.

Source: MIDF Research - 27 Nov 2024