KUALA LUMPUR: Property developer SP Setia Bhd has year-to-date posted RM1.25bil property sales, which has surpassed its financial year ending Oct 31 (FY09) target of RM1.1bil.

Analysts said the impressive property sales achieved was due to its attractive 5/95 financing campaign, which began on Jan 31.

An analyst with ECM Libra said after hitting its annual sales target, SP Setia terminated the campaign in July.

“As at Jan 31, sales were at RM102mil. The campaign boosted sales to RM1.25bil at end-July,” he said in a report yesterday.

However, the brokerage expects sales momentum to remain firm until end-FY09 due to conversion of sales bookings.

The analyst said SP Setia’s nine-month ended July 31 results came in within house but was below market expectations, as annualised net profit came in just 1.6% below its estimates, and 11.7% below consensus estimates.

“We upgrade our target price to RM3.36 (from RM2.65) based on price-earnings ratio (P/E) valuation of 19 times after taking into account elevated optimism on the property sector as well as strong sales momentum,” he said.

SP Setia is currently trading at a forward P/E of 26 times, which has exceeded peak valuation seen during past property cycles.

“This is not justified even after taking into account commendable sales achieved,” the analyst noted.

Moreover, he said, the stock was trading at a steep 37% premium to its realisable net asset value estimate of RM3.35.

The brokerage has maintained a “sell” call on SP Setia.

An analyst with OSK Investment Research also has a “sell” call on SP Setia as the stock was trading at a significant premium even to calendar year 2010 fair value.

“Its valuation is lofty in view of the current phase of the property cycle,” he said in a report, adding that the brokerage was less optimistic that SP Setia could repeat its feat (of higher property sales) for the rest of the year.

He said a correction in property stock prices appeared inevitable in the short term as investors, who had bought the story of a robust V-shaped recovery for the property cycle in 2010, were likely to be disappointed soon.

However, the brokerage has upgraded SP Setia’s target price to RM3.47 from RM2.10, based on calendar year 2010 valuations.