S P Setia to continue cutting debt, preparing for potential REIT

• Strategic priorities include divesting non-core assets, refinancing borrowings and generating more cash flow to service debt, S P Setia said in its annual report released on Wednesday.

KUALA LUMPUR (March 27): Malaysian property developer S P Setia Bhd plans to continue cutting its debt as well as sell more unimportant assets and improve its investment properties for a potential real estate investment trust (REIT).

Strategic priorities include divesting non-core assets, refinancing borrowings and generating more cash flow to service debt, S P Setia said in its annual report released on Wednesday. Debt has been cut by almost RM2.4 billion over the past two years but rising interest rates have lifted finance costs, it noted.

“We aim to maintain an optimal balance between debt levels and capital allocation for growth,” S P Setia said. “The goal is to improve financial stability and flexibility by reducing the burden of finance costs that erode our value creation.”

Meanwhile, the planned divestments have been part of the company’s broader effort to strengthen its balance sheet and boost its earnings. In November 2023, the company sold 18 acres of land in Setia City to KSL Bestari Sdn Bhd for RM228.8 million.

In June that year, the company disposed of 500 acres of land in Semenyih to Mah Sing Group Bhd for RM392.04 million. The company still owns more than 6,300 acres of land that could command a gross development value of up to RM119.74 billion.

The company did not identify the assets that would be put up for sale in the annual report.

Further, the company said it is prepping some of the properties and “strengthening the assets’ long term value for real estate investment trust potential in order to provide our investors with access to income-generating properties while also potentially unlocking value for S P Setia.”

Apart from developing townships, S P Setia also owns hotels, shopping malls, industrial parks, offices and convention centres. The company however didn’t detail the planned asset enhancement initiatives.

Earlier this month, S P Setia reported a 71.12% jump in its fourth quarter profit ended Dec 31, 2023 (4QFY2023) to RM148.24 million from RM86.63 million a year earlier even as revenue fell 18.98% year-on-year to RM1.38 billion from RM1.71 billion.

Full-year net profit slipped by a marginal 1.92% to RM298.57 million from RM304.4 million in FY2023, as revenue slid 1.81% to RM4.37 billion from RM4.54 billion. The company achieved RM5.1 billion in total sales last year.

For FY2024, S P Setia has set a sales target of RM4.4 billion, and the company has said it will prioritise accelerating township and large-scale industrial developments while further strengthening its global footprint.

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