We maintain our
Neutral rating with a new fair value of RM3.76. 1QFY13 results came in below
expectations. This is not an issue as 1H earnings are typically weaker. Sales
are going strong, with the RM2.02bn sales as at Feb 13 exceeding the target of
RM5.5bn. Meanwhile, SP Setia has also announced that upon Tan Sri Liew’s
retirement, Dato’ Voon, the current Deputy President & COO, will succeed
Tan Sri Liew as President & CEO.
Below expectations.
SP Setia’s 1QFY13’s net profit came in below expectations on an annualised
basis. However, 1H numbers are typically weaker, making up less than 50% of
full year earnings. Therefore, we are not concern on the weak 1Q profit. EBIT
margin shrunk to 13% from 21% in 4QFY12, due to the handovers of some
residential and commercial properties in Klang Valley and JB. We believe this will
normalise, as the construction of the higher-valued projects progresses
further.
RM2.02bn property
sales thus far. Four months into the financial year, SP Setia achieved
RM2.02bn sales. On an annualised basis, the sales would surpass management’s
target of RM5.5bn. The key sales contributors in the four months are mainly
from the Johor projects – Bukit Indah, Eco Gardens, Sky 88, as well as Eco Glades
in Cyberjaya, Setia Alam, and Eco Sanctuary in Singapore. EcoHill in Semenyih
was launched during the period. We believe the overseas projects will kick in
materially over the next few quarters, particularly the Battersea Power Station,
and hence we are confident that SP Setia will be able to hit its sales target for
the year. Since the launch of the Battersea project, Phase 1 of 800 units released
has achieved 95% booking. SPA will be signed from next month onwards.
Forecasts.
Unchanged.
Investment case.
We raise our fair value slightly to RM3.76 (from RM3.66), at 15% discount to
RNAV, after updating the landbank data. We believe the recent rerating in many
property stocks is short-lived, and sentiment will turn cautious as we move
closer to the election date. Therefore, despite the higher fair value, we maintain
our Neutral rating on the stock.
Source: RHB
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