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Semi-Ds in Shah Alam going for RM1.6m-1.7m
The cover story of The Edge’s City & Country section reported that sales have picked up strongly in SP Setia’s Bandar Setia Alam flagship project and that prices of newly launched products have hit new records. While we are not surprised by the township’s strong performance, we are pleasantly surprised that semi-Ds and condos in the township are being priced at levels similar to those in Kuala Lumpur. We maintain our
earnings forecasts but flag that there is upside if sales and prices, particularly for Setia City, come in above expectations. We maintain our OUTPERFORM call and target price of RM5.51, based on a 20% premium over its FD RNAV of RM4.59. Factors that could catalyse the stock include 1) continued strong sales in FY10, and 2) SP Setia’s renewed appetite for land banking, both domestically and internationally. SP Setia remains our top pick in the property sector.
The news
In the cover story of The Edge’s City & Country section, Bandar Setia Alam (BSA) General Manager Mr. Tan Hon Lim talked about the progress of SP Setia’s flagship township and recent launches. The following are highlights of the article.
• The 2,500-acre BSA township was launched in 2004. The price of linkhouses measuring 18x65 ft has appreciated from RM170k to RM280k while those measuring 20x70 have gone up from RM220k to RM380k. Shopoffices launched in 2004 at RM800k are now transacted at RM1.2m.
• The 50%-owned 791-acre Setia Eco Park, which is next to BSA, is 35% developed. Semi-Ds of 3,000 sq ft built-up are now transacting at RM1.3m compared to their 2006 launch price of RM720k. Slightly more than 1,000 homes have been developed. In a launch on 8 Aug, 74 semi-Ds priced from RM1.7m enjoyed a take-up rate of 60%.
• BSA has been a hive of activity in recent weeks. On 31 Jul, 76 double-storey links priced at RM518k achieved 93% take-up while 64 semi-Ds (built-up from 3,005 sqft) priced at RM968k were fully sold. On Aug 7, 52 semi-Ds (built-up from 1,749 sqft) with price tags of RM450k were all taken up while 60 three-storey semi-Ds (built-up from 4,663 sq ft) priced at RM1.6m were 75% sold.
• The 250-acre Setia City will see the completion of the 700,000 sq ft Setia City Mall in 1Q2012. Anchor tenants are Golden Screen Cinemas and Parkson. Setia City will also include SP Setia’s new HQ, a medical centre, colleges, office buildings, condominiums and possibly a hotel. Two commercial lots next to Setia City Mall have been sold to Khind Holdings and Top Glove.
• SP Setia is planning to build condos adjacent to Setia City Mall. It is looking at units measuring 800-1,000 sq ft, with an indicative price of RM500 psf. Also in the planning stages is a convention centre with a capacity of 150-200 tables.
• 45% of BSA has been developed while 7,500 homes have been sold and 5,500 handed over. The township is home to 150,000 people and has a Chinese and Tamil school as well as a national primary school. A secondary school will be operational in Jan 2011. In 2004, buyers for homes in BSA came mainly from Klang and the surroundings but these days, buyers are from all over including
Comments
We are not surprised that properties in BSA and Setia Eco Park are selling well as demand has consistently been strong. The two projects historically made up between a quarter to half of group sales but made up a combined 52-54% of total sales in the last two quarters (see Figure 1). Nonetheless, we are somewhat surprised that semi-D prices have reached RM1.6m in BSA and RM1.7m and above in Setia Eco Park as
such prices are similar to prices in Kuala Lumpur. Also, the group’s aim to launch condos next to Setia City Mall at RM500 psf suggests that SP Setia is valuing its properties at prices similar to those in Kuala Lumpur. If successful, this would be a major feat as BSA is located in the Shah Alam to Klang area and is quite far away from the capital city. It also attests to the group’s ability to create value and its marketing prowess.
The greater BSA, which measures 3,930 acres in total and includes Setia Eco Park and parcels of land sold, was the transformational acquisition that enabled SP Setia to leapfrog to the top of the property developers’ league. Even after six years, there is still plenty of development scope. The total GDV of the township is RM17bn – RM7bn BSA, RM3bn Setia Eco Park and RM7bn Setia City. Only RM3bn (RM2bn BSA and RM1bn Setia Eco Park) has been developed. It will take another 8-10 years to complete and should remain the group’s main contributor for many more years. The undeveloped GDV of greater BSA amounts to RM14bn or nearly half the group’s total undeveloped GDV of RM30bn.
Valuation and recommendation
We are encouraged that property values in BSA and Setia Eco Park are on the rise and that take-up for recent launches has been strong. Should selling prices and sales for Setia City come in higher and earlier than expected, there would be upside to our forecasts. The transformation of a huge tract of plantation land into a vibrant township with properties selling at a huge premium over its surroundings reaffirms SP Setia as the developer with the best management in our books. Greater BSA is now the group's cash cow and will continue to anchor earnings for the foreseeable future. We maintain our OUTPERFORM call and target price of RM5.51, which we continue to base on a 20% premium over its fully diluted RNAV of RM4.59. Factors that could catalyse the stock include 1) continued strong sales in FY10, 2) SP Setia’s renewed appetite for landbanking, both domestically and internationally, and 3) a revival in investors’ appetite for property developers given record sales by many developers this year. SP Setia remains our top pick and core holding in the property sector.
The cover story of The Edge’s City & Country section reported that sales have picked up strongly in SP Setia’s Bandar Setia Alam flagship project and that prices of newly launched products have hit new records. While we are not surprised by the township’s strong performance, we are pleasantly surprised that semi-Ds and condos in the township are being priced at levels similar to those in Kuala Lumpur. We maintain our
earnings forecasts but flag that there is upside if sales and prices, particularly for Setia City, come in above expectations. We maintain our OUTPERFORM call and target price of RM5.51, based on a 20% premium over its FD RNAV of RM4.59. Factors that could catalyse the stock include 1) continued strong sales in FY10, and 2) SP Setia’s renewed appetite for land banking, both domestically and internationally. SP Setia remains our top pick in the property sector.
The news
In the cover story of The Edge’s City & Country section, Bandar Setia Alam (BSA) General Manager Mr. Tan Hon Lim talked about the progress of SP Setia’s flagship township and recent launches. The following are highlights of the article.
• The 2,500-acre BSA township was launched in 2004. The price of linkhouses measuring 18x65 ft has appreciated from RM170k to RM280k while those measuring 20x70 have gone up from RM220k to RM380k. Shopoffices launched in 2004 at RM800k are now transacted at RM1.2m.
• The 50%-owned 791-acre Setia Eco Park, which is next to BSA, is 35% developed. Semi-Ds of 3,000 sq ft built-up are now transacting at RM1.3m compared to their 2006 launch price of RM720k. Slightly more than 1,000 homes have been developed. In a launch on 8 Aug, 74 semi-Ds priced from RM1.7m enjoyed a take-up rate of 60%.
• BSA has been a hive of activity in recent weeks. On 31 Jul, 76 double-storey links priced at RM518k achieved 93% take-up while 64 semi-Ds (built-up from 3,005 sqft) priced at RM968k were fully sold. On Aug 7, 52 semi-Ds (built-up from 1,749 sqft) with price tags of RM450k were all taken up while 60 three-storey semi-Ds (built-up from 4,663 sq ft) priced at RM1.6m were 75% sold.
• The 250-acre Setia City will see the completion of the 700,000 sq ft Setia City Mall in 1Q2012. Anchor tenants are Golden Screen Cinemas and Parkson. Setia City will also include SP Setia’s new HQ, a medical centre, colleges, office buildings, condominiums and possibly a hotel. Two commercial lots next to Setia City Mall have been sold to Khind Holdings and Top Glove.
• SP Setia is planning to build condos adjacent to Setia City Mall. It is looking at units measuring 800-1,000 sq ft, with an indicative price of RM500 psf. Also in the planning stages is a convention centre with a capacity of 150-200 tables.
• 45% of BSA has been developed while 7,500 homes have been sold and 5,500 handed over. The township is home to 150,000 people and has a Chinese and Tamil school as well as a national primary school. A secondary school will be operational in Jan 2011. In 2004, buyers for homes in BSA came mainly from Klang and the surroundings but these days, buyers are from all over including
Comments
We are not surprised that properties in BSA and Setia Eco Park are selling well as demand has consistently been strong. The two projects historically made up between a quarter to half of group sales but made up a combined 52-54% of total sales in the last two quarters (see Figure 1). Nonetheless, we are somewhat surprised that semi-D prices have reached RM1.6m in BSA and RM1.7m and above in Setia Eco Park as
such prices are similar to prices in Kuala Lumpur. Also, the group’s aim to launch condos next to Setia City Mall at RM500 psf suggests that SP Setia is valuing its properties at prices similar to those in Kuala Lumpur. If successful, this would be a major feat as BSA is located in the Shah Alam to Klang area and is quite far away from the capital city. It also attests to the group’s ability to create value and its marketing prowess.
The greater BSA, which measures 3,930 acres in total and includes Setia Eco Park and parcels of land sold, was the transformational acquisition that enabled SP Setia to leapfrog to the top of the property developers’ league. Even after six years, there is still plenty of development scope. The total GDV of the township is RM17bn – RM7bn BSA, RM3bn Setia Eco Park and RM7bn Setia City. Only RM3bn (RM2bn BSA and RM1bn Setia Eco Park) has been developed. It will take another 8-10 years to complete and should remain the group’s main contributor for many more years. The undeveloped GDV of greater BSA amounts to RM14bn or nearly half the group’s total undeveloped GDV of RM30bn.
Valuation and recommendation
We are encouraged that property values in BSA and Setia Eco Park are on the rise and that take-up for recent launches has been strong. Should selling prices and sales for Setia City come in higher and earlier than expected, there would be upside to our forecasts. The transformation of a huge tract of plantation land into a vibrant township with properties selling at a huge premium over its surroundings reaffirms SP Setia as the developer with the best management in our books. Greater BSA is now the group's cash cow and will continue to anchor earnings for the foreseeable future. We maintain our OUTPERFORM call and target price of RM5.51, which we continue to base on a 20% premium over its fully diluted RNAV of RM4.59. Factors that could catalyse the stock include 1) continued strong sales in FY10, 2) SP Setia’s renewed appetite for landbanking, both domestically and internationally, and 3) a revival in investors’ appetite for property developers given record sales by many developers this year. SP Setia remains our top pick and core holding in the property sector.
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