S P Setia Bhd will begin new projects within Setia Fontaines, an integrated development north of Seberang Perai, Penang, which is benefiting from growth from a nearby 850-acre industrial park.
Setia Fontaines is a 1,691-acre township with a gross development value (GDV) of RM12 billion. It will include commercial development including office space, a trade centre, warehousing, a technological hub, shopping centres, F&B, a convention centre, a hotel, and a leisure area.
Wong Wei Sum, an analyst with Maybank Investment Bank (Maybank IB), said that the company recently visited Setia Fontaines and was informed that the project accounted for 10 per cent of SP Setia's remaining GDV.
As end-Dec 2021, S P Setia has a remaining landbank of 7,237 acres worth RM122 billion in GDV, spread over Malaysia, London, Singapore, Vietnam, and Australia.
"Setia Fontaines offers a similar eco theme as Setia Eco Park but is more affordably priced like Setia Alam. The catalyst to the project include the industrial park nearby, which could offer employment opportunities and attract new population to the area over the longer term," she said in the firm's research report.
She stated in a note that the project, which primarily offers standard landed properties, is anticipated to still have at least 25 to 30 years of development left.
According to Wong, the project has produced stable and increasing sales for SP Setia since its launch in 2018.
The project generated RM157 million in sales (+89 per cent year on year), or 4 per cent of SP Setia's property sales.
She disclosed that Setia Fontaines' products are more premium (RM500,000 to RM600,000 per unit), in comparison to nearby competitors like Scientex Bhd's Tasek Gelugor and Sungai Dua developments, which are priced at RM250,000 to RM280,000 per unit.
"We suspect the premium pricing is due to the Setia brand name and a well-designed development plan. The project's sizeable land area of about 1,000 acres also signifies SP Setia's long-term commitment and this somehow has provided confidence to the potential buyers and increased the perceived value of their purchase, we think," she said.
Wong said that SP Setia will launch the commercial plot with a GDV of RM130 million and 450 units of landed residential properties with a GDV of RM400 million in the third quarter of this year (Q3 2023), after receiving a positive response to the launch of Amansara North in the fourth quarter of 2022.
Amansara North has a GDV of RM296 million and 499 landed residential units. Some 80 per cent of the units have been sold, with an average selling price of RM580,000.
Wong also disclosed SP Setia's continued focus on reducing its debt level through the sale of non-core landbank assets and strategic joint venture partnerships for some of its projects to reduce the up-front project development expenses.
"Apart from that, cash flow repatriation from its overseas projects will help to lower its debt level," she said.