S P Setia announced it is partnering with Mitsui, which operates the Mitsui Outlet Park KLIA, in a JV to develop two parcels of
2.67 acres commercial land. This land is in Setia Federal Hill, Bangsar which is strategically located opposite of KL Sentral. The development, which has an estimated GDV of RM1.4b, will comprise two residential towers with approximately 1,300 units, with the first tower slated to be launched in CY24. Given that adjacent high-rise units are generally priced at RM1,000/sq ft, the price tag of c.RM1.1m/unit could indicate an estimated unit size of 1,100 sq ft.
Kenanga notes that the project should be sound but some details are unclear. The house believes that the partnership is overall a positive as Mitsui has also been involved in several developments in the past, most notably the retail mall Lalaport
Bukit Bintang City Centre which had a GDV of RM1.6b. That said, it is uncertain the breakdown of share ownership between SPSETIA and Mitsui, as well as the details of the land cost and land title. Assuming the JV is on a 50:50 basis with a targeted completion of four years after launch (i.e. CY27), the project’s potential contribution may only add 1.0 sen and 0.3 sen to our RNAV/share and TP, respectively
The house maintains its view of underperform on S P Setia with a TP of RM0.68 on unchanged RNAV discount of 75%, lower than 60% it ascribed to the sector to reflect its high gearing ratio. Kenanga said it remains cautious on SPSETIA due to its significant exposure to the high-end landed and high-rise residential segment, which is not highly sought after by buyers at present, (ii) its high gearing and hence debt servicing obligation amidst a high interest environment, and (iii) losses at its JV projects.
