SP Setia (SPSB), in a surprise turn, announced that the proposed land disposal to the Scientex JV has been aborted again due to “non-fulfilment of conditions precedent within the extended completion period”. To recap, the 960-acre land sale to Scientex was first mooted back in 2021, but was called off after it failed to obtain a waiver of the Bumiputera equity condition imposed by the Economic Planning Unit (EPU). SP Setia and Scientex JV then revisited the deal in July 2023 with higher price of RM547.65m. However, details behind the latest rejection by EPU are still light at this juncture. All told, we are disappointed as the land deal, we believe, could have helped bump the Group’s earnings while rightsizing its huge landbank and lighten its debt burden. As such, we cut our FY24 earnings by 46% with the latest development. Pending more details from management, we turn more cautious and downgrade SP Setia from Outperform to Neutral, with TP of RM1.00 (from RM1.20) on higher discount of c.65% from c.60% previously (vis-à-vis sector average of ~0.5x to NTA).
Source: PublicInvest Research - 8 Jan 2024
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