THE BUZZ
Yesterday, SP Setia announced to Bursa Malaysia that its wholly owned subsidiary has entered into a sale purchase agreement with Penang Realty SB for the proposed purchase of approximately 21.3 acres of freehold land at Lot 1343 Mukim 18, Daerah Timor Laut, Penang for a purchase consideration of about RM185.6m.
OUR TAKE
More on the deal.The 21.3-acre land constitutes a portion of the First Grade land held under GRN 16798 for Lot 1343, Mukim 18, Northeast District, Penang with a total area of 23.69 acres. First Grade land is a special title in Penang which does not carry any specific category of land use and such land does not need to be converted for housing development. The remaining portion of 2.38 acres will be retained by the vendor. The land can be currently accessed using Jalan Lembah Permai via the land's eastern boundary. The land is located about 10 minutes away from international beach resorts along Jalan Batu Ferringhi and approximately 15 minutes from Georgetown. At RM200psf, the land appears to be priced on the high side relative to the historical transacted prices. Nevertheless, we think that there is a premium attached to its First Grade land title. SP Setia intends to develop the land into an eco-themed mixedresidential development, comprising terraced houses and condominiums, with an estimated gross development value (GDV) of RM1.1bn. We view the acquisition positively as it is in line with SP Setia's strategy of increasing its presence in Penang, which is one of the favourite destinations for local and foreign property investors.
Maintain Trading Buy. We continue to value SP Setia based on 2.3x FY12 P/NTA, which is equivalent to the stock's 5-year historical average P/NTA, and arrive at our unchanged FV of RM4.34.