KUALA LUMPUR: CGS-CIMB Equities Research is upbeat about S P Setia Bhd’s massive land bank, improving net gearing levels in the forecast financial years 2021 to 2023.
The group is also poised to benefit from rising demand for green certified buildings due to its experience.
The research house, in its latest report, said investors’ major environmental, social and governance (ESG) concerns for S P Setia were green buildings’ cost premium impact on earnings and the availability of a green building ecosystem.
S P Setia has experience in obtaining green certification for buildings as well as in-house industrialised building system (IBS) manufacturing facilities, which is uncommon among developers.
The property group could benefit from the growing demand for green-certified buildings given its experience within the space, it said.
“From the recent ESG engagement session with S P Setia’s management, we gathered that investors’ major ESG concerns for the group were the readiness of the building and construction sectors to embrace green buildings, potentially the higher building cost for green buildings and the availability of green building materials and expertise in Malaysia.
“The group is working on its ESG roadmap, which is expected to be announced in 2022.” it added.
Under S P Setia’s sustainability strategy, the group will work on getting its commercial properties, such as corporate office towers or strata office towers, certified by green building rating tools, namely the Green Building Index (GBI).
S P Setia corporate headquarters was the first privately-owned office and third building in Malaysia to be certified GBI Platinum and GreenRE Platinum.
Within the vicinity, the Setia City Convention Centre was the first GBI certified convention centre.
“Given S P Setia’s experience in designing and obtaining green certifications for its buildings, the group is poised to benefit from the higher demand for green certified buildings, especially within the commercial and industrial space.
“More companies may consider a certified green building as their new office space to reduce their carbon footprint.” the research house said.
CGS-CIMB Research said developers are encouraged to adopt IBS for sustainable construction practices to reduce wastages and emissions.
S P Setia has IBS facilities at three locations in Klang Valley specialising in building high-rise apartments, landed houses and commercial buildings using pre-cast technology. Most of its high-rise projects are adopting IBS.
The group also received an award for achieving the highest IBS score in Malaysia, at 93.95, in 2019.
“We gathered that not all developers possess in-house IBS manufacturing capacities and S P Setia is one of the early adopters,” the research house said.
CGS-CIMB Research has raised the target price for SP Setia to RM1.82 from RM1.40 previously as it rolls over to end-2022 based on the forecast FY23 book value (BV).
The research house lifted its target price to BV to 0.6 times (its three-year mean) from 0.47 times previously (-0.5 standard deviation from its three-year mean P/BV) given encouraging sales momentum.