[MARC] MARC Ratings affirms ratings on S P Setia’s issuances

MARC Ratings has affirmed its ratings on S P Setia Berhad’s sukuk programmes as follows:

The outlook on the long-term ratings is stable.

The ratings reflect S P Setia’s entrenched domestic market position in township development, strong sales track record, and sizeable unbilled sales that would support earnings visibility over the medium term. The ratings also incorporate a one-notch uplift on MARC Ratings’ assumption of support from parent Permodalan Nasional Berhad (PNB), if needed.

S P Setia’s ongoing domestic projects carried a gross development value (GDV) of RM7.6 billion as at end-1Q2025, from 37 developments across various established townships in the Klang Valley, Johor and Penang; total domestic unbilled sales amounted to RM3.1 billion. Completed inventories declined to RM1.3 billion compared to RM1.8 billion in 2023, reflecting the group’s approach of staggering launches to avert inventory build-up. New launches would focus on the domestic market in its existing townships; these would carry an estimated combined GDV of RM5.0 billion over the near term.

The residential apartment project in central Melbourne, Australia, that was recently launched in October 2024, has received a positive response with a booking rate of 50% as at date. The project has a GDV of AUD887.0 million and comprises 870 residential apartment units. Construction will be carried out in three phases; this is set to begin in 2026 and expected to be fully completed by 2029. In Vietnam, S P Setia has obtained land development rights to undertake further development within its existing townships, located in close proximity to Ho Chi Minh City.

The group’s expansion into industrial developments, in addition to its focus on residential properties, involves three industrial parks, namely Setia Alaman in Klang, Setia Fontaines in Penang, and Tanjung Kupang in Johor. The three industrial parks have a total combined area of 1,120 acres and will be developed with joint-venture partners.

In 1Q2025, S P Setia recorded revenue of RM770.7 million and pre-tax profit of RM141.5 million (1Q2024: RM1.5 billion; RM181.2 million), due to lower land sales, and contributions from its foreign projects, given most of them have been completed and handed over in 2024. This notwithstanding, operating profit margin remains strong at 31.2% as at end-1Q2025.

Borrowings stood at RM8.4 billion, translating into a gross debt-to-equity ratio of 0.53x as at end-1Q2025 (2024: RM8.6 billion; 0.54x). While group borrowings have improved since 2021, supported by deleveraging efforts, MARC Ratings expects leverage to broadly remain around the current level as the group will incur additional funding requirements for its Australian project. Liquidity position remained strong with cash balances of RM3.0 billion, providing a strong buffer against its financial and operational obligations.

Proceeds from the newly established rated programmes will mainly be used to fund initial costs for new green projects as well as working capital requirements, and support future expansion plans. Meanwhile, the two-notch rating differential between the Perpetual Sukuk and IMTNs reflects the subordination of the former to the senior unsecured obligations of the latter, in line with MARC Ratings’ methodology. Based on the Perpetual Sukuk’s characteristics, the rating agency would accord it 50% equity credit.

Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my
Vanessa Leong, +603-2717 2931/ xinyue@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my