KUALA LUMPUR: Kenanga research views the land swap deal between DBKL and the SP Setia-Tradewinds joint venture as positive in the longer-term with no immediate-term earnings impact.
The joint venture, Retro Highland, entered into a privatisation agreement with DBKL for the development and commissioning of the Quality Sustainable People Housing Project, in return for 52.25 acres of leasehold land in Cheras, KL.
The land, with a gross development value of RM11.03bil, will be developed over two phases over 11 years.
"The implied land cost of RM1.19b implies a land cost-to-GDV ratio of 11%, which is fair. Given that it is a land swap deal, on balance, the impact will not be overly significant," said Kenanga in a report on Tuesday.
The research house noted that it will receive Phase 1 land of 13.89 acres upon constructing 1,192 new residential units on another plot of land for the relocation of the initial batch of residents under the government's public housing scheme.
The construction of Phase 1 is set for four years with an estimated cost of RM344.8mil.
Meanwhile, Phase 2 land will be received upon completion of the remaining allocations with an estimated construction cost of RM835.1mil.
"We note that Phase 1 will have minimal balance sheet impact on SPSETIA since cost is staggered and the project will be accounted as an associate. Similarly, there is no immediate-term impact to earnings as Phase 1 can only kick-start after the first batch of relocations."
Kenanga reiterated its outperform call on SP Setia with an unchanged target price of RM3.50.
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