Analysts positive on SP Setia's Singapore land purchase

PETALING JAYA: Most analysts are positive on SP Setia Bhd's recent winning bid to buy leasehold land measuring about 4.6 acres in Toh Tuck Road, Singapore for S$265 million (RM847.6 million), as it enables the group to further extend its footprint in the country.
On Tuesday, the property developer said it is planning to develop a five-storey luxury condominium on the land with a gross development value of S$457 million (RM1.44 billion), which will take about five years to complete.
In a note yesterday, PublicInvest Research said the project, which is the group's third project in the country, should be well received given its track record so far, adding the project is important to ensure the continuity of its brand presence in one of its core markets.
The research house said, with proceeds of more than RM1 billion raised recently via its rights issue, it believes that the group should have no problem financing the new land deal.
On a separate note, MIDF Research said it is positive on the acquisition, considering its good experience in property development in Singapore, as their previous two projects in the country, namely 18 Woodsville and Eco Sanctuary have received good take up rate.
"We estimate that the land purchase in Singapore is revised net asset value (RNAV) accretive with earnings contribution to come in from financial year 2019 (FY19) onwards," it added.
As the project launch is in 2018, MIDF Research said it has maintained its FY17 and FY18 earnings estimate at RM724 million and RM751 million respectively.
"Our target price has been increased to RM4.03 (from RM4 previously) as we have added in Toh Tuck Road land into our RNAV," it added.
Meanwhile, HLIB Research has maintained its "buy" call on the group, with target price increased to RM4.00 from RM3.97 previously based on unchanged 30% discount to a higher RNAV of RM5.71 (from RM5.67) after imputing the land acquisition.
"We incorporate the forecast of this project, resulting in higher profit-after-tax of 1.5% for FY19," it noted.