Actual vs. Expectations
1Q13 net profit of RM93m was within expectations,
making up 20% each of street and our FY13E estimates.
4M13 recorded sales
of RM2.0b (+64% YoY) which means they are on schedule to meeting their full
year target of RM5.5b.
Dividends None, as expected.
Key Results Highlights
YoY, 1Q13 net profit rose 26% on higher
billings since FY12 saw strong sales growth of 29%.
QoQ, topline slid 10%
to RM688m while its bottomline dipped 27%. The quarter saw pretax margin
compression by 8.4ppt to 16.9% because of proportionately higher billings from
high-rise projects (e.g. Setia Sky Residence, Sky Garden @ Bukit Indah Johor)
which tend to carry lower margins compared to their landed residential projects.
Furthermore, the previous quarter did record a gain on sale of Setia Alam
commercial land.
Outlook The group has formalized and approved its Management
Succession Plan. Tan Sri Liew will eventually be retiring (timeline not provided)
and will be succeeded by Dato’ Voon Tin Yow, who is currently the Deputy
President and COO, while Dato’ Teow Leong Seng (currently Executive VP and
Group CFO) will be positioned as Deputy President. Both have been with Tan Sri
Liew since 1996-97. This comes as no surprise to us given the lacklustre share
price performance even though the group has achieved record breaking sales and
catalytic projects like Battersea. In addition, Tan Sri Liew has also exercised
his second put option. Nonetheless, we are comforted that there is a succession
plan in place which entails his core team members who have been contributing to
a large part of SPSETIA’s success.
Change to Forecasts No changes to estimates. Management has guided
that they expect margins to normalize in the coming quarters. Unbilled sales of
RM6.3b provides close to 2 years visibility.
Rating Maintain MARKET PERFORM
Maintain TP of RM3.30
based on 40%* discount on our FD SoP RNAV of RM5.46.
Downside risk is limited
since it at its 6-year trough of 1.4x FY13E PBV (-1.0SD). However, upside maybe
potentially capped by rising GE uncertainties and investors adjusting to the
idea of Tan Sri Liew’s eventual retirement from SPSETIA.
Risks Sector risks
Source: Kenanga
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