S P Setia expected to launch Melbourne CBD project in 2H17

S P Setia Bhd (June 21, RM3.64)

Maintain buy with a target price of RM4.03: S P Setia Bhd has won a bid for a piece of 1,714-sq m (18,449 sq ft) land at 111, A’Beckett Melbourne in the Central Business District (CBD) for A$61 million (RM198 million).

The company intends to transform the land into a high-rise residential development. The gross development value (GDV) of the project is estimated at A$419 million (RM1.34 billion) with an expected launch date in the second half of 2017 (2H17).

Previously, S P Setia had acquired five pieces of land in Melbourne and these include the 0.2ha Fulton Lane site for A$30 million in 2009, which was developed into luxury apartments with a GDV of A$470 million, the 0.9ha land at Parque, the 0.21ha Carnegie land with a price of A$6.68 million in November 2015, the 850-sq m land in Prahran for A$10 million in April last year and the 4,140-sq m land in Melbourne CBD for A$101 million in May last year.

The land is located less than a 15-minute walking distance from the Royal Melbourne Institute of Technology University (RMIT). It is also opposite Fulton Lane (SP Setia’s first project in Melbourne). This may explain its premium valuation of A$3,306 per sq ft which is higher than its previous purchase of land in the Melbourne CBD at A$2,266 per sq ft.

As the project launch is scheduled to be in 2HFY17 and earnings will only be recognised upon completion, we expect earnings to start to kick in only from FY2020 onwards. Hence, we maintain our earnings forecast for FY17 and FY18. — MIDF Research, June 21

This article first appeared in The Edge Financial Daily, on June 22, 2017.

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