S P Setia’s Ecohill achieves unbilled sales of RM469 mil

Maintain buy with an unchanged target price (TP) of RM3.60: We recently visited Setia Ecohill, which is a recently developed township in Semenyih, Selangor. Launched in December 2012, the freehold township was built with an environmentally friendly focus and having green design concepts in mind. 

We note that the total area of land is 753 acres (304.73ha) and S P Setia Bhd has pledged 80 acres of it for parkland with greenery, hence the remaining 673 acres for development. Currently, Setia Ecohill has achieved unbilled sales of RM469 million as of May 31. 

S P Setia has launched RM378 million worth of projects in Setia Ecohill, which is already 100% of its targeted launches for the financial year ending Dec 31, 2015 (FY15). The projects launched consist of 191 units of double-storey terrace houses priced from RM598,000 to RM632,000, 167 units of superlink houses priced from RM768,000, and 56 units of shop offices priced from RM1.79 million to RM3.71 million. 

The Lingkaran Lekas-Ecohill Link (LLEL) is now open, and this may be a catalyst of Semenyih. Media reports mentioned that the LLEL is expected to reduce travel time from Kajang and Rinching/Beranang to Kuala Lumpur by 15 to 30 minutes, as the new link bypasses Semenyih. We are positive on this as better road connectivity to Setia Ecohill should result in long-term appreciation of property prices there. 

While we are positive on Setia Ecohill’s long-term prospects, we are keeping our FY15 sales target for S P Setia at RM4 billion. Note that we have included our estimate of a RM320 million sales contribution from Setia Ecohill. We also maintain our FY15 and FY16 core net income estimates at RM602 million and RM723 million respectively. 

We maintain “buy” on S P Setia, with a TP of RM3.60 based on a 10% discount to revised net asset value. We like S P Setia as it is expected to benefit from higher British pound/ringgit rate. The upcoming results for the third quarter of FY15 are likely to be good, and its net dividend yield of 4.7% is higher than its peers’ average of 3.8%

This article first appeared in the digitaledge Daily on Aug 20, 2015. Subscribe here.