S P Setia buys land for RM381m

KUALA LUMPUR: In the midst of being the target of a takeover, property developer S P Setia Bhd has announced the proposed acquisition of a piece of land measuring 673.2 acres (272.4ha) in Semenyih, Ulu Langat, Selangor for RM381.25 million cash.

Through its wholly-owned subsidiary Setia Hicon Sdn Bhd, the company intends to acquire the freehold land from Spektrum Megah (M) Sdn Bhd for RM13 per sq ft (psf).

The land will be developed into a mixed township project with a gross development value (GDV) of RM4 billion.

A 10th of the payable price is to be paid upon execution of the agreement and the remainder to be fulfilled three months from then, said the company.

The deal does not require shareholders' approval.

As at July 31, S P Setia had RM617.6 million in cash reserves and RM1.37 billion in borrowings. Its net debt of RM755.31 million translated into a net gearing ratio of 23.5%.

The company said the land is situated midway between Semenyih, Bangi Old Town and Beranang, is generally undulating and zoned for mixed housing development.

It added that no valuation had been carried out on the land and the figure was based on the company's knowledge of the market value of properties around the area.

The company said it will attempt to replicate the "twin project success" of Setia Alam and Setia Eco Park, its township developments in the Klang Valley.

"The company's success in transforming relatively undeveloped locations into prime residential and commercial hubs is well charted. Substantial upfront investments in infrastructure to improve connectivity along with a continued enhancement in amenities and services have made both townships highly sought addresses today," it said.

This will be done by combining "mass market products" reserved for the 1,010 acres in Beranang the company proposed to purchase nearly two months ago with the "more up-scale product mix" planned for the new piece of land, which is said to be located 6km northwest of the former.

The company said the two projects were estimated to have a combined GDV of RM7.5 billion.

Interestingly, the purchase consideration for the latest piece of land of RM13 psf was 73% higher than the price it paid for the nearby Beranang land two months ago.

It had proposed to acquire the Beranang land in early August from Ban Guan Hin Realty Sdn Bhd for RM330.13 million or RM7.50 psf.

Back then, S P Setia also said it did not carry out a valuation on the land.

With a total landbank of 1,683 acres there, S P Setia will now be a significant player in the Semenyih area.

"The proposed acquisition offers S P Setia a good opportunity to tap the strong demand for attractively-priced homes by first-time owners and other home buyers in the Semenyih-Kajang corridor," the company said.

While the Semenyih-Bangi area is currently seen as a sleepy extension of Kajang, it is fast gaining the attention of developers looking for large tracks of land on the fringe of the Klang Valley to develop into medium-end townships.

At the end of last year, UEM Land Holdings Bhd bought two parcels of land in Bangi measuring 448 acres for RM259 million or RM13.30 psf.

The land was acquired from Inch Kenneth Kajang Rubber Plc and is generally viewed as being better located.

UEM Land said it planned a 10-year project with a GDV of RM2.84 billion for the land.

With the Semenyih-Bangi area still largely comprising oil palm plantations, there are large tracts of land available for developers to create townships, as opposed to small niche projects in other parts of the Klang Valley, a market observer said.

The area's low land cost of below RM20 psf also allows developers to embark on affordable projects within an hour's drive to downtown Kuala Lumpur, he noted. "There are not many areas left in the Klang Valley with land priced below RM20 psf. And with the focus on building more affordable properties within the RM500,000 range, buyers have a choice between a landed home in this area and a shoe-box apartment in Kuala Lumpur or Petaling Jaya for the same price," he added.

Other major players in the area include United Malayan Land Bhd and the Sunway group.

While S P Setia has been on an aggressive expansion trail — the company has this year acquired land in Semenyih, Johor, Cyberjaya and Melbourne — the timing of this latest purchase, right in the middle of Permodalan Nasional Bhd's hostile takeover exercise, could raise some eyebrows.