Partnering Mitsui Fudosan in RM1.3b Semenyih project will reduce financial stress on S P Setia, analysts say

• The joint venture will allow S P Setia to reduce its capital outlay for the project and comes at a time when the company is targeting to lower its financial leverage, according to MIDF Amanah Investment Bank and Kenanga Investment Bank.

KUALA LUMPUR (Oct 9): A partnership with Japan’s Mitsui Fudosan will help reduce the balance sheet stress on S P Setia Bhd (KL:SPSETIA) in the RM1.3 billion development of a residential project in Semenyih, analysts said.

The joint venture will allow S P Setia to reduce its capital outlay for the project and comes at a time when the company is targeting to lower its financial leverage, according to MIDF Amanah Investment Bank and Kenanga Investment Bank.

The “structure is one of its strategies to strengthen its balance sheet” and the deal will “crystalise land value” of Setia EcoHill, MIDF Amanah said.

On Wednesday, S P Setia announced that it is jointly developing with the Japanese real estate company, the project, comprising 683 units of bungalows, semi-detached and cluster homes within the Setia EcoHill township in Semenyih. The shareholding structure was not disclosed.

S P Setia first collaborated with Mitsui Fudosan, Japan’s biggest listed real-estate company in terms of earnings, in the Setia Federal Hill project in December 2023. The latest project in the Setia EcoHill would be Mitsui Fudosan’s first landed housing project in Malaysia.

“We view this move as an indication of stronger-than-anticipated demand within the Semenyih area, prompting the group to accelerate future launches to capture this momentum,” Kenanga said.

The initiative is timely, amid a gradual market shift towards higher-value, township-based developments, and the increasing overhang affecting the lower-end, affordable housing segments, the research house added.

There are seven “buy” calls, including from MIDF and Kenanga, five “hold” ratings, and one “sell” out of 13 research houses covering S P Setia. The average target price is RM1.25, according to Bloomberg, which implies a potential 33% gain from the current price.

S P Setia was mostly unchanged on Thursday at 93.5 sen, valuing the property developer at RM4.68 billion on Bursa Malaysia.

As Penang girds itself towards the last lap of its Penang2030 vision, check out how the residential segment is keeping pace in EdgeProp’s special report: PENANG Investing Towards 2030.