NEWSROOM
 
ECM Libra maintains sell call on SP Setia

ECM Libra Investment Research has maintained its sell recommendation on SP Setia Bhd at RM4.38 with revised target price of RM2.80 (previously RM2.38) and said the company's annualised 1HFY09 results were 25% and 21% below house and consensus full-year estimates respectively.

However, the research house deemed the results to be broadly in line as it expects 2HFY09 results to be stronger due to lumpy gain arising from land sold to Lend Lease, and higher progress billings following stronger than expected sales.

SP Setia declared an interim net dividend of 3.75 sen.

ECM Libra said that on a year-on-year (y-o-y) basis, SP Setia's 1HFY09 topline and bottomline were 5.7% and 25.7% lower respectively.

It said this was mainly due to 1QFY08 results included land sale to AEON with sales value of RM54 million and net profit of RM26 million, and lower gross profit margins.

"Stripping out the lumpy land sale, 1HFY09 results were actually marginally higher y-o-y by 1.7%," it said.

ECM Libra said SP Setia had managed RM522 million sales up to 2QFY09 and RM803 million up to June 15.

"This is a commendable achievement, which exceeded our initial expectation. We now expect sales momentum to remain strong, putting SP Setia on track to meet its sales target of RM1.1 billion for FY2009," it said.

The research house said SP Setia had finally launched its maiden Vietnam project in March 2009. A total of 257 units of terrace houses with average selling price of US$60,000 per unit were launched in Setia Eco Lakes, of which about 200 units were sold, it said.

"Subsequent to 2QFY09, Setia Vista project in Penang was also launched with 100 units of double storey terrace houses being offered. It has achieved 43% take-up rate within one month," it said.

ECM Libra said it was changing its valuation basis from realised net asset value to price over earnings (RNAV to P/E) as the property sector was showing sign of bottoming out.

Due to improving sentiment as well as liquidity, the research house said it ascribed an upper-mid cycle P/E of 15 times on SP Setia FY09 earnings to derive our revised target price of RM2.80 (previously RM2.38 based on 30% discount to RNAV).

"At current price, SP Setia is trading at forward P/E of 23 times which is similar to peak valuation seen during past property bull market which is not justified even after taking into account commendable sales in 2QFY09," it said.

"Besides trading at a steep premium to historical average P/E of 12.7x and our RNAV estimate of RM3.41, SP Setia also trades at significant premium to its peers. As such, we maintain our sell call on SP Setia."

<< back
 
 
 
Copyright 2021 ECM Libra Group Berhad (713570-K). All rights reserved | Term