KUALA LUMPUR: Maybank Investment Bank Research is maintaining its buy call on SP Setia and target price of RM1.39 after the property company decided to monetise non-core landbank to fund future/existing developments or pare down its debt.
In a research note on Monday, the research house said SP Setia was selling 959.7 acres of agricultural land in Tebrau, Johor to Scientex for RM518.1mil (average RM12.39 psf).
The selling price is 7% higher than the market value of RM480.8mil opined by an independent registered valuer.
The land sale will be completed in three phases, i.e. 1Q 2022 (phase 1; 451.7acres; RM236.1m or RM12 psf), 2Q 2023 (phase 2; 259.5 acres; RM141.3mil or RM12.50 psf) and 2Q 2024 (phase 3; 248.6 acres; RM140.8mil or RM13psf).
“The land sale is expected to result in a RM290mil net disposal gain, to be recognised between 2022 and 2024.
“We adjust our FY22/23 earnings forecasts by 19.7- 20%. We keep our TP unchanged at RM1.39 (on 0.4 times FY21 price-to-book value), ” it said. Last Friday, it closed at RM1.06.
Maybank Research noted that according to SP Setia’s 2020 corporate slides, the latter had identified 1,295 acres of land located in KL, Selangor and Penang for disposals (excluding the latest land sale).
These parcels of land have an estimated market value of RM1.96bil. The land disposal is expected to churn out a disposal gain of RM290mil spread over 2022-2024.
“We raise our FY22/23 earnings forecasts by 19.7%/20% to factor in the land sale. As at December 2020, SP Setia’s net gearing stood at 0.59 times, ” it said.