S P Setia (AmResearch) buy;fair value RM7.10

Another Land buy in Johor

• We reaffirm our BUY rating on SP Setia Bhd with our fair value unchanged at RM7.10/share based on an unchanged 5% discount to our fully-diluted NAV of RM7.46/share.

• Setia announced on Friday that it is proposing to acquire a 266acre piece of land in Tebrau, just off the Kempas Interchange for RM126mil or about RM11psf. This acquisition would be financed via internal financing and bank borrowings.

• Setia plans to develop this land for a mixed residential project, akin to its current development in Johor, Setia Eco Gardens. We estimate this development would have a gross development value of RM1.1bil, assuming a 70% efficiency ratio and the terrace units will be priced at an average RM500k each.

• The group now would have about 1,300 acres of land to be developed in Johor. We are confident Setia would generate strong sales given its proven track record in Johor despite
the tough competition there.

• This acquisition follows its recent Bangsar land swap deal, underlining its active landbanking strategy. Recall that SP Setia has been given the right to develop 40acres of
prime land in Bangsar in return for building a new health and research complex on a 55- acre site in Bandar Setia Alam.

• Going forward, we expect SP Setia to achieve its target of RM3bil of new sales this year, to be underpinned by existing township sales and new integrated commercial projects such
as KL Eco City and Setia City with a combined GDV of RM11bil.

• KL Eco City will be launched next month where the group would kick off things with the development of strata and boutique offices. Meanwhile the first of the three residential
towers may be launched some time in June this year, with some 711 units on offer at pricing of RM900psf-RM1,000psf.

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