KUALA LUMPUR: CGS-CIMB Equities Research is upbeat on SP Setia’s massive land bank to cater to changes in consumer preferences, improving net gearing levels in FY21-23F, and poised to benefit from rising demand for green certified buildings due to its experience.

       The research house said on Tuesday investors’ major ESG concerns for SP Setia were green buildings’ cost premium impact on earnings and availability of a green building ecosystem.

       SP Setia has experience in obtaining green certification for buildings as well as in house 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 SP 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 higher building cost for green buildings and the availability of green building materials/expertise in Malaysia.

       “The group is working on its ESG roadmap, which is expected to be announced in 2022.” It added.

       Under SP 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, i.e. Green Building Index (GBI).

       SP Setia corporate headquarters was the first privately owned office and third building in Malaysia to be certified GBI Platinum and GreenRE Platinum.

       Within the same vicinity, Setia City Convention Centre was the first GBI certified convention centre.

       Given SP Setia’s experience in designing and obtaining green certifications for its buildings, the research house believes the group is poised to benefit from higher demand for green certified buildings in future, especially within the commercial and industrial space, as more companies may consider a certified green building as their new office space to reduce their carbon footprint.

       CGS-CIMB Research said developers are encouraged to adopt IBS for sustainable construction practices to reduce wastage and emissions.

       SP Setia has industrialised building system (IBS) facilities at three locations in Klang Valley specialising in building high-rise apartments, IBS landed houses and commercial buildings using precast 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 SP Setia is one of the early adopters,” the research house said.

       CGS-CIMB Research lifts the target price for SP Setia from RM1.40 to RM1.82 as it rolls over to end-2022 based on FY23F book value (BV).

       The research house lifted its target price to BV to 0.6 times (its three-year mean) vs. 0.47 times previously (-0.5 standard deviation from its three-year mean P/BV) given encouraging sales momentum.