SP Setia (SPSB MK, NEUTRAL, FV RM4.34 Last Price RM3.78)

SP Setia’s 1QFY12 net profit made up  only  21.4% of both our and consensus’ FY12 forecasts, which we deem in line after taking into account seasonal factors in 1QFY12. Y-o-y revenue  nudged  down 5.3%, while PBT  jumped  19.3%  on improved margins. We maintain our forecasts and Neutral call on SP Setia, with an unchanged FV of RM4.34, based on 2.3x FY12 P/NTA, which is equivalent to its 5-year historical average P/NTA.

Largely within. SP Setia reported a net profit of RM74m for 1QFY12, which made up only about 21.4% of both our and consensus full-year forecasts. We view the results as within our expectations in view of the seasonal  effect  arising from the  major  festive holidays in 1QFY12.  However,  the year-end holidays and Chinese New Year celebrations led to slower progress billings as construction activities slowed down during that period. Revenue for 1QFY12 was down by 22.4% q-o-q and 5.3% y-o-y  as  the Chinese New Year  was  celebrated earlier in the month of  January this year  versus February in the previous year. Despite the lower revenue y-o-y, net profit jumped 19.3% due to improved margins, mainly attributed to the higher selling prices for its properties. The ongoing projects which contributed to the company’s bottom- and top-lines included Setia Alam and Setia Eco-Park, Setia Walk, Setia Sky Residences, Bukit Indah, Setia Indah, Setia Tropika and Setia Eco   Gardens in Johor Bahru and Setia Pearl Island, Setia Vista and Setia Greens in Penang.

RM1.23bn in new sales. SP Setia has set a sales target of RM4bn for FY12 and as at end-Feb 2012, it had achieved about RM1.23bn worth of new sales. The strong sales performance in FY12 was achieved through a combination of sustained sales contribution from its established projects in the Klang Valley, Johor Bahru and Penang, as well as sales from KL Eco City and Fulton Lane in Melbourne, which were launched towards the end of FY11. As its maiden foray into East Malaysia via Aeropod in Sabah also registered a strong take-up, the group’s sales performance in FY12 is expected to strengthen further.

Maintain Neutral. We maintain our forecasts and Neutral recommendation on SP Setia, with an unchanged FV of RM4.34, based on 2.3x FY12 P/NTA, which is equivalent to its 5-year historical average P/NTA. At the closing date of the GO, the joint offerors (PNB and Tan Sri Liew) held  a combined  78.95% stake in SP Setia,  which gave  rise to  a shortfall in  the 25% public shareholding  requirement. As the joint offerors  intend to maintain SP  Setia’s listing, they are  currently  studying various options to  address this shortfall.

Source: OSK188