Stock Focus S P Setia rises 1.2% after FY13 results, but clouded by outlook and leadership transition

Stock Focus S P Setia rises 1.2% after FY13 results, but clouded by outlook and leadership transition
Business & Markets 2013
Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com
Friday, 13 December 2013 15:26


KUALA LUMPUR (Dec 13): S P Setia Bhd rose as much as 1.2% today after its CEO Tan Sri Liew Kee Sin said its unbilled group sales of RM9.6 billion will guarantee earnings for the next three years.

At 12.30pm lunch break, S P Setia was trading at RM3.09, with some 0.7 million shares done. The stock had earlier risen as much as 4 sen to RM3.13.

Tan Sri Liew said the property developer will be doing well for the next three years despite the ‘gloomy’ property outlook due to the rise in real property gains tax (RPGT) and the banning of the developer interest bearing scheme (DIBS).

Sales for its financial year ended Oct 31 had also doubled to RM8.2 billion, from RM4.2 billion in the previous year, surpassing its target of RM5.5 billion.

Net profit for the year rose 6% year-on-year (y-o-y) to RM417.9 million from RM393.8 million, while revenue rose to RM3.06 billion from RM2.52 billion previously.

The group had also proposed a final dividend of 7 sen per share.

Despite the positive results, Tan Sri Liew also mentioned that the group will face challenges going forward such as increasing cost pressures due to skilled labour shortages, reduction of petrol subsidies in 2013 and the electricity tariff hike to take effect in 2014.

He is expected to quit S P Setia next year, with the group’s COO Datuk Voon Tin Yow to be his successor as CEO of the firm.

The group’s results were in line with estimates, but research houses have maintained their ratings and target prices (TP) mainly due to S P Setia not providing a sales target for 2014, coupled with the bearish outlook on the property sector.

Hong Leong Investment Bank (HLIB) is maintaining its “hold” rating at RM3.09 with a TP of RM3.35, due to lack of fresh rerating catalyst.

“We note that S P Setia did not provide a sales target for 2014, as management acknowledges the headwinds stemming from the recent cooling measures under Budget 2014.

“We also gathered that it is not aggressively looking for new landbank at this point in time, which further supports its cautious stance,” it added.

HwangDBS Vickers Research (HDBSVR) also maintains a “hold” rating, with a TP of RM3.50, and said the group may face stronger headwinds due to the fiscal reforms set out in the Budget 2014.

“Recent tightening measures will likely dampen sentiment especially towards high-end properties, but S P Setia’s strong following and rising exposure to overseas projects might cushion some of the impact,” the research house said in a note.

RHB Research Institute also maintains its “neutral” rating on the stock, with a fair value (FV) of RM3.54, citing the leadership transition and human capital costs as the key concerns for the stock.