HDBVR maintains Buy on SP Setia, TP RM5.10 (8864)

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining a Buy rating on SP Setia and target price of RM5.10, based on 10% discount to RNAV of RM5.64.
“Its
RM40bil Battersea development will be a game-changer, potentially
doubling its earnings and boost RNAV by more than 15%,” it said on
Friday.
HDBSVR viewed this project positively given the
strategic location, low entry cost (land & infrastructure cost only
constitute 8% of GDV vs typical more than 30%), ready approvals and
favourable interest rate/forex environment.
On Thursday, SP
Setia announced a 10% year-on-year rise in net profit to RM100.4mil for
its third quarter ended July 31, 2012. For the nine months ended July
31, SP Setia posted a 8.7% year-on-year rise in net profit to
RM266.8mil while revenue rose 10.25% to RM1.763bil.
SP Setia's
sales for the 10 months ended Aug 31, 2012 had hit RM3.312bil and
exceeded its full-year sales in the previous financial year.
HDBSVR
said the 3QFY12 net profit came in at RM100mil taking 9MFY12 earnings
to 70% and 75% of its and consensus estimates, respectively.
Growth
was driven by larger contribution from newer projects and stronger
margins with higher average selling prices. Future earnings is
underpinned by RM3.9bil unbilled sales (2.0 times FY11 property
development revenue of RM1.9bil) and a strong launch pipeline.
“Property
sales remained robust, hitting RM1.0bil in 3QFY12 (+44% on-year, +20%
on-quarter) due to maiden contribution from 18 Woodsville@ Singapore
and KL Eco-City condos. 9M sales touched RM2.9b, or 71% of management's
RM4bil target for FY12 (+21% on-year).
“The recent launch of
Setia EcoGlades@ Cyberjaya saw an impressive 80% take up despite
premium pricing of RM1.1mil to RM1.7mil for terrace and semi-detached
houses,” said HDBSVR.