News

• SP Setia announced to acquire a 1.02 acres freehold land in Melbourne Central Business District (CBD) for AUD101m or RM300.8m.

• The land is located at the 308 Exhibition Street, northeast precinct of Mel bourne’s CB D opposite the Carlton Gardens.

• Proposed to redevelop into 2 residential towers comprising up to 800 residential units with a retail podium space. The project is slated to be launched in 2H17 with estimated GDV of AUD640m or RM1.9bn. Financial Impact

• Land cost is about 16% of GDV, which we deem the acquisition price as fair.

• We estimate the potential development to increase RNAV by 1.7%.

Pros/Cons

• We are slightly positive on the proposed acquisition as it will help to strengthen its presence in the Australian property market after two successful projects launched in Fulton Lane and Parque. Both projects have been fully sold.

• This is the third parcel of land bought within 6 months follows the recent acquisition of lands in Carnegie (AUD6.7m) and Prahran (AUD10m).Total GDV for the three property projects in Australia is AUD712m or RM2.1bn (circa 3% of total remaining GDV).

• Unbilled sales stood at RM9.2bn, representing 2.6x FY14’s property devel opment revenue. We believe this will provide earnings visibility in the near term.

Risks

• Escalation in construction and raw material costs; and
• Delays in launches.

Forecasts

• Unchanged.

Rating

HOLD

• Posi tives: Strong product concepts and pipeline; consistent dividends.

Negatives

• : No longer the most liquid property stock in Malaysia.

Valuation

• Maintain HOLD with unchanged TP of RM3.12 based on discount to RNAV of 35%.

Source: Hong Leong Investment Bank Research - 3 May 2016