Maybank IB says it is not surprised by SP Setia’s latest land sale in Johor as the disposal is in line with its direction to optimise and rebalance its landbank while maintaining an efficient capital structure. SPSB aims to lower its net gearing to 0.3x by 2027. The house is raising its FY23-25 earnings forecasts by 4-76% to factor in the land sale.
SP Setia is selling land to Scientex again but at a higher price as it looks to dispose of 959.7 acres of agricultural land in the Mukim of Tebrau to Scientex Lestari S/B for MYR547.7m (or MYR13.1psf). Scientex Lestari is 70% owned by Scientex Bhd (SCI MK, CP: MYR3.47, Not Rated). Agreement for the same land, which was initially agreed to be sold to Scientex for MYR12.4 psf in mid2021, was terminated due to non-fulfilment of a condition precedent in relation to approval from the EPU, Ministry of Economy.
The latest land sale in Johor came in within expectation says Maybank IB as it is in line with the group’s priority to strengthen its balance sheet through landbank management. The land price of MYR13 psf (+5.6% higher than the initial selling price to Scientex) is slightly lower than the current asking prices of MYR14-30psf around the area but it is understandable due to the sizeable land bank of 959.7 acres. The land disposal, which will be completed between 4Q23 and 2Q24, will result in a disposal gain of MYR438m.
The house is raising its FY23/24/25 earnings forecasts by 76%/5%/4% after factoring in higher land sale gain (+90%) in Johor (to be recognized in 2023), 500 acres of land sale in Semenyih and change in progress billing assumptions. Surprises could come from further land sales. It is understood that SP Setia is currently negotiating another land sale in the Klang Valley
