RHB Research described the land purchase as a bold move by the new management team.
KUALA LUMPUR: RHB Research Institute is positive on SP Setia’s acquisition of a 1,675-acre piece of land in Seberang Perai Utara, which is the mainland side of Penang state.
It said on Thursday this acquisition is sizeable enough that it would allow SP Setia to have an anchor presence in mainland Penang, given that some of its peers have also recently bought some land there.
“This transaction marks the company’s first major move after the stabilization of its new management team. We maintain our Buy rating, with an unchanged target price of RM4 (27% upside),” it said.
RHB Research described the land purchase as a bold move by the new management team. The acquisition of a 1,675-acre parcel of land in Seberang Perai Utara marks SP Setia’s first major move after the stabilisation of its new management team.
To recap, the board of directors confirmed the top three (CEO, COO and CFO) management positions in April this year.
“Hence, in our view, this acquisition should send a positive signal to the market on the execution ability of the new management team,” it pointed out.
The research house said the purchase price of RM8.50 per square foot is reasonable, and the total purchase consideration represents only 6.5% of it total GDV of RM9.6bil.
“Including some zoning charges and compliance costs, we believe the total effective land cost should work out to be 10%-15% of total GDV,” it said.
The land, strategically located within the Butterworth-Sungai Petani growth corridor, is accessible from the North-South Highway via the Bertam Interchange. It is also surrounded by existing townships, retail malls, a university campus and golf course.
“We understand that the site is near Bandar Putra Bertam (built by Hunza Properties), and current market prices for terrace homes in the area nearby are roughly RM350,000 to RM400,000 per unit.
“SP Setia’s acquisition is timely in our view. As the property market is now going through a slowdown, land acquisition costs would likely be at the low end.
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“The land size is also meaningful enough for SP Setia to establish an anchor presence in Mainland Penang, since peers like Eco World have also recently aggressively accumulated landbank in the Batu Kawan area, where land prices are much more expensive.
“Currently, SP Setia only has a presence in Penang island within the northern region. We believe the company will release more details of its funding plan for this acquisition.
