REPORTING a nine-month net profit of RM245.5mil for its financial year (FY) ending Oct 31, 2011, property developer SP Setia Bhd managed to beat market expectations. The results released over the week was also an encouraging improvement from the RM176.7mil net profit registered for the previous corresponding period.

Analysts note the company's faster-than-expected margin recovery as the booster. They also attribute the encouraging results of SP Setia to higher selling prices for its properties.

“This was in stark contrast to the situation last year when margin was still under pressure from stagnant prices and higher marketing costs,” ECM Libra said.

SP Setia's net profit for the three months to July 2011 rose to RM91.24mil, compared with the RM87.25mil in the corresponding period last year. Revenue rose to RM583.47mil from RM414.9mil.

The company has an estimated current unbilled sales amount of RM2.7bil, compared with RM1.7bil for FY10, and that should underpin near-term earnings visibility. It is on track to achieving its RM3bil sales target, after having registered RM2.32bil of property sales for the 10 months of FY11.

The counter has been subject to heavy selling recently and is currently trading below its fair value. A Bloomberg poll of 23 showed there were 11 “buy” calls on the company and six calls to “hold.” Average target price for the stock is RM3.91.