S P Setia Berhad

Sharing from another remisier...

*Quick Take On Property Sector* 📝

*Mah Sing and Eco World (ECW) experienced the steepest declines among property companies*, with shares dropping 15% and 14%, respectively, following the announcement of restrictions on advanced AI chips. SP Setia and Sunway have also declined by 6% post-announcement. Here are our thoughts:

🔺 Concerns about future land valuations and the total addressable market for data centers (DC) have weighed on sentiment, but we believe the market has fairly priced in the associated risks, pending further clarity from the US government.

🔸In our view, *there remains a risk to Mah Sing’s Southville joint venture* due to its ties with parent company - Chindata, which is headquartered in China and subject to Chinese data laws, as well as association with a potential offtaker - Bytedance, which is also a major client of Chindata. The Chinese data laws raise concerns about data sovereignty and potential challenges in attaining/retaining VEU status.

🔸Despite these concerns, *we think the sell-down in Mah Sing is unwarranted given its proactive measures in safeguarding from premature project commitments.* We understand that the collaboration with BDC has built-in conditions precedent, requiring BDC to secure Tier 1 hyperscale or AI-focused companies, before the project can officially commence. *It seems that finalizing the agreement is proceeding as planned*, targeting commencement of Phase 1 operations in 2026. This suggests that BDC sees less risk and low likelihood of the project halting. Additionally, BDC has paid a non-refundable upfront fee, providing financial assurance to Mah Sing while reserving the land for development.

🔸Excluding DC, *Mah Sing’s core business remains resilient, with strong demand for its property launches and higher progressive billings for 2025-26* as its projects enter mid-stage construction.

🔸 *Current price still provides a fair amount of upside* to the scenario-based TP if we were to:

1) exclude DC components, our target price will be RM1.94.

2) exclude DC components and assume a higher discount on RNAV at 50% (vs 5-year mean of 63%), our target price will be RM1.61.

🔺*ECW’s valuation has increasingly traded at a premium* due to its exposure to industrial parks and its ability to secure land sales to top-tier data centre players, such as Microsoft and Princeton.

🔺*This restriction does not impact ECW’s current and ongoing deals, and we expect the company to announce another data center deal soon.* Additionally, the 7% cap limit per country requirements for VEU status companies is unlikely to significantly impact US-based hyperscalers (ie Microsoft), given their larger scale and demand for DC.

🔺We believe a valuation premium on ECW is still justifiable, as: a) current and ongoing DC deals are not impacted, b) it’s also *focusing on high-margin high-technology industrial parks which continues to be in high demand*, and c) strong pricing power and execution. Our target price of RM2.35 is based on 40% discount to RNAV (vs historical mean of 60%).

🔸*SP Setia, with its share price down 6% post-announcement, has suffered collateral damage* despite having no current DC exposure.

🔸We estimate that *only 6% of the landbank will be used for future JV with DC* (calculated based on 18% industrial landbank and 1/3 is from Tanjung Kupang land, majority of that land will be used for DC). Hence, any impacts would also be minimal. Our target price of RM1.95 is based on 50% discount to RNAV, close to its historical mean of 57%.

🔺*Sunway Bhd's share price also declined by 6% post-announcement, mainly driven by SunCon's significant exposure to DC projects*. However, we believe the impact will be mitigated as: a) SunCon can rely on internal contracts from Sunway Bhd, and b) its order books and tenders are primarily focused on cloud DCs, which have minimal demand for the restricted AI chips.

🔺*Our current target price of RM4.71* is based on SOTP valuation, with a 15% RNAV discount and 21x 2025PE.

If we were to cut SunCon’s implied PE to 17x, *following our construction analyst’s recommendation,* our target price will be *RM4.61,* still provides 10% upside at current level.

$SUNCON / 5263 (SUNWAY CONSTRUCTION GROUP BERHAD)
$SPSETIA / 8664 (S P SETIA BERHAD)
$MAHSING / 8583 (MAH SING GROUP BERHAD)

🇲🇾🇸🇬JS-SEZ: Unlocking High Value Growth And Fostering Win-Win Cross-Border Prosperity

• The much anticipated joint agreement to establish JS-SEZ has been formalised by both leaders of MY and SG following the 11th Malaysia-Singapore Leader’s Retreat today.

• Touted as the first-ever cross-country economic zone, JS-SEZ underscores both Malaysia and Singapore’s commitment to unlock high value growth and fostering win-win cross border prosperity

• The JS-SEZ rides on Singapore’s offering as a robust MNC business hub, and Johor to complement with competitive cost of doing business – with abundant supply of land, labour costs and favourable tax regime.

• Envisioned to be a successful industrialisation zone, JS-SEZ is expected to be >4x larger than Singapore and nearly twice the size of China’s Shenzhen. Meanwhile, 16 economic sectors have been proposed to be part of the zone which includes the new priority sectors i.e. Aerospace, EE&E, Chemical, Medical devices and Pharmaceuticals.

• This will be carried out at 9 flagship zones spanning JB City Centre, Iskandar Puteri, Tg. Pelepas - Tg Bin, Pasir Gudang, Senai – Skudai, Sedenak with 3 new flagship zones i.e. Forest City, PIPC and Desaru. Property summary to ensue with more details on these areas.

• In expediting approvals and streamlining processes, Invest Malaysia Facilitation Centre – Johor, will be establish to act as an one-stop centre in facilitating investments.

✅ Key Measures Proposed

• Pro-business policies and incentives including special tax breaks, grants and streamlined regulations.

• Special corporate tax rates will be offered to companies undertaking new investments in high-growth and high-value-added activities within JSSEZ. A special personal income tax rate will be announced at a later date. It is understood that the MOF is looking to revamp the tax structure to be more outcome-based, closely tied to the investments companies bring to the table.

• Foreign investor-friendly policies including robust IP laws and allowing 100% foreign equity in selected service sectors such as healthcare, social services, tourism, transport, business, and IT.

• Reduced friction from cross-border travel and trade via automated immigration lanes and paperless clearance for goods

• Enhanced immigration passes with Malaysia’s existing visas to be enhanced similar to the DE Rantau Nomad Pass

• Support from the MY Gov for the development of the JS-SEZ via a new infrastructure fund to support power, water, roads, electricity, gas and to some extent, land (It was mentioned that land falls under the jurisdiction of the state govt)

• Funding support from the SG Gov to facilitate the expansion of SG companies into the JS-SEZ and potential twinning of MNC operations in Singapore and the SEZ

• Targeting 50 high-value projects and 20,000 high-skill jobs created over the next 5 years

• The first wave will target global companies managing geopolitical risks, advanced E&E industries, data centers, Pengerang-related projects, tourism, and green electricity initiatives.

• A streamlined pathway will be available for investors to access green electricity. Instead of waiting for quotas, they can work directly with Genco TNB to secure green electricity through the CRESS program.

🚰 Impact/Beneficiaries

• Utilities: Corporate Renewable Energy Supply Scheme (CRESS) should benefit all solar players (Pekat, Malakoff, Solarvest, Samaiden), YTLP, TNB

• O&G: Dialog, beneficiary not only via its position in Pengerang, also plus its position in Tanjung Langsat

• Construction: JS-SEZ and updates on the proposed KL-SG HSR shall benefit mid-large cap construction stocks like Suncon, Gamuda, IJM, YTL

• RTS/ART: Public transport improvements in Johor are not part of the JSSEZ initiative and remain pending a decision from the federal government. We gather that negotiations for the Johor LRT/ART are ongoing, with no final decision yet. Developers involved with RTS currently are Suncon, IJM, Gadang, Econbhd. So further rail network developments may benefit these names with track records.

• Property: Developers with landbank under the JS-SEZ flagship zones are UEMS, IOIPG, Mah Sing, SP Setia, ECW, Lagenda, Sunway Bhd (refer to table).

• Technology: While details remain limited, the potential lies in attracting IC designers, OSAT providers, and EMS players. This is expected to follow the establishment of facilities by MNCs, paving the way for a robust technology ecosystem.

$UEMS / 5148 (UEM SUNRISE BERHAD)
$IOIPG / 5249 (IOI PROPERTIES GROUP BERHAD)
$SPSETIA / 8664 (S P SETIA BERHAD)

Top thread. Lemme contirbute abit oso

Sharing from remisier...

Here’s our strategy piece to kickstart the electrifying year of 2025!

1H25 OUTLOOK: Relying On Domestic Sparks

- While Malaysian equities predictably kicked off the year with caution, the FBMKLCI is still adequately charged up by robust domestic-driven liquidity and events. We anticipate the market to progressively adopt a risk-on mode as we expect US president-elect Donald Trump to be pragmatic in executing trade policies.

- Key arguments include: a) Most US trade policy scenarios envisioned would still favour Malaysia as a business-friendly onshoring manufacturing hub, b) the ringgit should be more resilient this time, and correlation to China’s Rmb hopefully weakens (as in recent periods)

- Market sentiment eventually supportive of outperformances by small-mid caps and selective laggards

- OVERWEIGHT on the building mat, property, construction, and selectively the technology and O&G sectors. Conversely, autos and telcos may Underperform in a rising market.

- Key domestic investment themes include Iskandar 2.0, data centre rollout, renewable energy, wage hikes winners, 4Q24 results season winners and blockchain

- Top picks clear near-term winners (results season) include RGB, MYEG and VS Industry. Others: HLBank, Inari (replaced Gamuda), IOI Prop, Pekat Group, Press Metal

- Thematic Beneficiaries: M&A (Yinson), Iskandar 2.0 and DC plays (SP Setia, Eco World, Mah Sing), mega infra (Gamuda), Wage Hikes and Consumption Spurt (MrDIY). Glove stocks could provide trading opportunities on pullbacks

$YINSON / 7293 (YINSON HOLDINGS BERHAD)
$MRDIY / 5296 (MR D.I.Y. GROUP)
$SPSETIA / 8664 (S P SETIA BERHAD)

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by PBIV

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by MAYBANK

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by MAYBANK

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by TA

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by RHB

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by PBIV

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by MAYBANK

$SPSETIA / 8664 (S P SETIA BERHAD)
Research Report by HLIB

Titan Trading Notes For Friday [18/10/2024]:

$KLCI had a decent rebound back towards the 1641 points region with an overall positive market sentiment today. Daily trading volume however settled around the 2.6 billion mark, which is just average for now.

Main stocks that showed strong buying momentum would be the likes of AIZO, SPSETIA, SIMEPROP, CEB, RHBBANK, CAPITALA, PBBANK, ELRIDGE, TANCO, BAHVEST, INARI, YEWLEE, IJM, TENAGA, SDCG, and UEMS. All of which were able to sustain their rallies throughout the day.

Seems like the market is trending sideways here as we await for budget 2025 to be tabled tomorrow by Prime Minister and Finance Minister DS Anwar Ibrahim. Main sectors to monitor would be:

1. Infrastructure Projects i.e. MRT3 and Penang LRT
2. Sarawak's development
3. Johor Theme
4. Cybersecurity
5. Food subsidies
6. Renewable Energy to met ESG targets
7. E-Invoice
8. Tech support to be high end chip manufacturers.

$SPSETIA / 8664 (S P SETIA BERHAD) after consolidating over the past month with RM 1.25+ as the main support, was finally able to breakout strong today, rallying all the way towards the RM 1.40 regions with good volume and buying momentum.

For now looking quite ripe for a bullish continuation pattern here, potentially towards the RM 1.60+ major resistance levels in the coming weeks. As long as it holds above its RM 1.30 immediate support, should be doing alright.

Will be monitoring SPSETIA closely here as seems to have formed its higher low regions already.

$ELRIDGE / 0318 (ELRIDGE ENERGY HOLDINGS BERHAD) on the other hand since consolidating over the past month here with RM 0.38+ as the main support levels, was finally able to breakout strong from its RM 0.40 major resistance levels, rallying towards the 4RM 0.41 regions with good volume and buying momentum.

For now looking quite ripe here for a potential uptrend continuation pattern potentially towards the RM 0.45+ major resistance levels soon. As long as it holds above the RM 0.40 support, should be looking quite bullish.

Will be monitoring ELRIDGE closely here as smart monies seem to be coming back in.

$JPG / 5323 (JOHOR PLANTATIONS GROUP BERHAD) although moving quite slow, had been able to form a solid support region around the RM 1+ levels over the past week here and slowly recover back towards the RM 1.05 levels today with good volume.

For now still looking healthy on an uptrend here. As long as able to sustain above its RM 1.02 support, could continue on towards and beyond the RM 1.07 all time high levels for an uptrend continuation pattern.

Will be monitoring JPG closely

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by Maybank

Titan Trading Notes For Friday [11/10/2024]:

$KLCI managed to rebound back towards the 1640 points region with an overall positive market sentiment today. Daily trading volume however remains quite low as we closed around the 2.6 billion mark today.

Main stocks that showed strong buying momentum would be the likes of PERTAMA, MYEG, MRCB, BPURI, YTL, NICE, HIAPTEK, SPSETIA, SDCG, IWCITY, YEWLEE, MAHSING, and YTLPOWR. All of which were able to sustain their rallies throughout the day on the top volumes list.

PERTAMA after hitting its RM 0.24+ major support levels yesterday, was able to rebound strong all the way towards the RM 0.32 regions with huge volume and buying momentum today after being massively oversold over the past weeks.

For now still looking strong here and as long as able to hold above its RM 0.295+ immediate support levels, could continue on towards and beyond the RM 0.35+ major resistance levels soon for a further rebound.

Will be monitoring PERTAMA closely here.

$SPSETIA / 8664 (S P SETIA BERHAD) ince retracing all the way back towards the RM 1+ major support levels during last month, had been able to slowly recover its ground and recently was able to hold steady above its RM 1.20+ main support levels.

For now seems to have formed its higher low regions already after neutralizing most of the selling pressure. If able to breakout from its RM 1.30+ major resistance levels, we could see it start to trend back towards the RM 1.50++ regions once more.

Will be monitoring SPSETIA closely here as seems like the buyers are back in control.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) despite retracing back towards the RM 2.04+ main support levels after TOPGLOV released its QR bomb, had been able to rebound strong and close back towards the RM 2.10 regions with good volume.

So far still looking quite strong here and as long as able to hold above its RM 2.05 immediate support levels, could breakout from its RM 2.15+ major resistance levels soon for an uptrend continuation pattern.

Will be monitoring KOSSAN closely here.

$SPSETIA / 8664 (S P SETIA BERHAD)

$SPSETIA / 8664 (S P SETIA BERHAD)

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by Maybank
Buy – TP RM1.64

“Steering clear of doubts"

We left last Friday's meeting with SPSB management feeling positive after clarification on the MYR101m loss reported in 2Q24 from their 40%-owned BPS project. Elsewhere, the listing of SPSB’s investment properties by 2025 is on track, and SPSB expects to finalize plans for its Tanjung Kupang industrial park, potentially involving data centers, within 2-3 months. We maintain our earnings forecasts. Our TP is MYR1.64 on an unchanged 0.5x FY25E P/B. We U/G SPSB to BUY with the stock now offering a 26% upside.

Analyst:
Wong Wei Sum, CFA
weisum@maybank-ib.com

$SPSETIA / 8664 (S P SETIA BERHAD) $SIMEPROP / 5288 (SIME DARBY PROPERTY BERHAD) $UEMS / 5148 (UEM SUNRISE BERHAD) $IOIPG / 5249 (IOI PROPERTIES GROUP BERHAD) $KSL / 5038 (KSL HOLDINGS BERHAD)

Titan Trading Notes For Friday [16/8/2024]:

Although $KLSE-KLCI resumed its upward trajectory, closing green around the 1612 points region, our overall market sentiment was on a profit taking mode today with over 760 counters closing red for the day. Daily trading volume settled around the 3.5 billion mark, mainly dominated by selling activities.

Main stocks that showed strong buying momentum today would be the likes of TANCO, CIMB, and PBBANK. All of which were able to sustain their rallies throughout the day on the top volumes list despite the weak market sentiment.

$SPSETIA / 8664 (S P SETIA BERHAD) due to being burdened by the Battersea Power Station project as seen in the latest report, took a huge hit, retracing all the way below its RM 1.30 major support levels on the daily chart.

So far not looking so good short term wise due to this sudden influx of sellers. For now needs to hold above its RM 1.25+ main support levels here before we can expect a rebound. Otherwise, could start trending downwards or enter into a consolidation phase at a lower price.

Will have to be more cautious on SPSETIA.

GOHUB despite the weak market sentiment, was definitely one of the star performers today as it was able to breakout towards the RM 1.25+ regions with good volume and buying momentum.

For now looking very strong here on an uptrend. As long as it's able to hold above its RM 1.19+ immediate support levels on the hourly charts, will be expecting further upside here.

Will be monitoring GOHUB closely as I believe the uptrend remains strong.

$UNIQUE / 0257 (UNIQUE FIRE HOLDINGS BERHAD) despite taking quite a hit, retracing back towards the RM 0.405+ regions, was able to rebound back during closing, closing around the RM 0.42 regions with good volume.

So far still looking quite healthy here on its brand new uptrend breakout. As long as able to sustain above its RM 0.40+ main support levels on the daily chart, could continue on towards and beyond its RM 0.445 all time high levels soon.

Will be monitoring UNIQUE closely

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by RHB
BUY – TP RM1.72

" Land Monetisation Driving Earnings; Maintain BUY”

SPSetia’s 1H24 earnings beat expectations, as its land monetisation strategy and equity stake sale in a project helped to offset an increase in one-off administrative expenses and wider losses related the Battersea Power Station JV. Its net gearing has also improved to 0.44x from 0.50x in FY23. Land sales amounting to MYR396m are expected to be recognised in 2H24, but, moving forward, earnings should be “more normalised” – driven mainly by its township developments and industrial expansion.

Analyst:
Loong Kok Wen, CFA
loong.kok.wen@rhbgroup.com
Wan Muhammad Ammar Affan
ammaraffan@rhbgroup.com

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by TA
BUY – TP RM1.91

" Anchored by Land Sales ”

Despite the wider losses from Battersea Power Station, we believe these
should be offset by the stronger performance in Malaysia. We maintain our
Buy recommendation on S P Setia with an unchanged target price of
RM1.91/share. Our valuation is based on P/Bk multiple of 0.7x against its
CY25 BPS and a 3% ESG premium incorporated into our TP. The valuation
remains undemanding, as the group is currently trading at a CY25 P/Bk of
0.55x, compared to the average P/Bk of 1.1x for larger developers under
our coverage

Analyst:
Thiam Chiann Wen
cwthiam@ta.com.my

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by HLIB
BUY – TP RM1.80

" Land sale boost, but offset by BPS losses ”

SP Setia reported 2Q24 core PATAMI of RM296.2m (+13.8x QoQ; +3.9x YoY), which brought 1H24’s sum to RM316.2m (+3.51x YoY). Despite making up 52.3% of our full-year forecast, we deem the results to be below our expectation as 1H24 results were boosted by substantial land sale gain of RM361m. The negative deviation in our results was due to wider-than-expected share of losses from Battersea. We lower our FY24/25 forecasts by -14%/-8.1% factoring in weaker performance from Battersea. Despite this, we remain confident that the group’s overall performance will be well-supported by the robust recovery in Malaysia’s property market. Maintain BUY with a lower TP of RM1.80 (from RM2.00) based on a higher 55% discount (from 50%) to our estimated RNAV of RM4.01

Analyst:
Tan Kai Shuen, CFA
kstan@hlib.hongleong.com.my

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by Maybank
HOLD – TP RM1.64

" Earnings could have been better”

SPSB’s 2Q24 core net profit of MYR308m (+4.1x YoY, +3.2x QoQ) came in below our expectation but above consensus. 6M24 property sales of MYR2.3b (incl. land sales) is on track to meet its internal target of MYR4.4b (-14% YoY) for FY24 but is also below our assumption. Net gearing improved to 0.41x (0.45x in end-1Q24) post-land sale. We cut earnings forecasts by 20%-28% and TP to MYR1.64 (-2sen) on unchanged 0.5x FY25E PBV. D/G to HOLD (from BUY) given limited upside potential of <10%.

Analyst:
Wong Wei Sum, CFA
weisum@maybank-ib.com

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by Kenanga
UNDERPERFORM – TP RM0.90

" Battersea Even Deeper in Red”

SPSETIA’s 1HFY24 earnings beat our forecast due to heavy land bank disposals which are expected to persist up till 2HFY24. This led us to raise our FY24F earnings by 144%. However, consensus estimate also missed as losses from Battersea have widened with certain profit guarantee clauses being triggered upon handover, keeping us less optimistic for SPSETIA. Maintain our anti- consensus UNDERPERFORM but with a higher TP of RM0.90 (from RM0.85) on updates to our book assumptions.

Analyst:
Clement Chua
clement.chua@kenanga.com.my

$SPSETIA / 8664 (S P SETIA BERHAD)
Research by MIDF
BUY – TP RM1.72

" Earnings Boosted by Land Sales Gain”

• 1HFY24 earnings above expectations
• Earnings boosted by land sales gain
• New sales at RM2.3b in 1HFY24
• Earnings forecast revised upwards
• Maintain BUY with a revised TP of RM1.72.

Analyst:
Jessica Low Jze Tieng
jessica.low@midf.com.my

$SPSETIA / 8664 (S P SETIA BERHAD)

$IOIPG / 5249 (IOI PROPERTIES GROUP BERHAD) $UEMS / 5148 (UEM SUNRISE BERHAD) $SUNWAY / 5211 (SUNWAY BERHAD) $SPSETIA / 8664 (S P SETIA BERHAD) $KSL / 5038 (KSL HOLDINGS BERHAD)

KUALA LUMPUR: S P Setia Bhd has unveiled Ferrous 3, contemporary double-storey terrace homes, in the vibrant, art-inspired township of Setia AlamImpian in Shah Alam on Aug 3.

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - AMANAHRAYA TRUSTEES BERHAD - AMANAH SAHAM BUMIPUTERA

More REITs on the Horizon?

The market is abuzz with news that $WCT / 9679 (WCT HOLDINGS BERHAD) is planning to establish and list a REIT, an opportunity that could unlock significant value for the company and marks a long-awaited retail REIT listing. Although specific details have not yet been released, investor excitement is palpable. Other companies might also pursue REITs to unlock their value in the future. Here are a few that could be planning REIT listings:

1. $IOIPG / 5249 (IOI PROPERTIES GROUP BERHAD): Recent acquisition activity suggests that IOI Properties intends to establish a REIT. In this post (https://cutt.ly/9ezktjtw), I have detailed the assets the company owns, which you can refer to for more information.

2. $IJM / 3336 (IJM CORPORATION BERHAD): In 2023, IJM Land's COO revealed plans to establish a REIT in the future. Currently, IJM does not meet Bursa's requirements to establish a REIT. There is also market speculation that IJM might list its highway assets as a REIT or Business Trust in the future.

3. $SPSETIA / 8664 (S P SETIA BERHAD): SP Setia's CEO recently revealed that the company is considering establishing a REIT to diversify its asset portfolio, potentially including retail complexes, office buildings, schools, and a convention center. Some of the key properties currently owned by SP Setia are Setia City Mall in Setia Alam, the INC Mall (formerly known as KL Eco City Mall) in Kuala Lumpur, Setia City Convention Centre in Shah Alam, Setia Spice Convention Centre in Penang, and the Amari Kuala Lumpur hotel in the KL Eco City township.

Are there any other companies potentially seeking REIT listings that I haven't mentioned? Feel free to share additional information.