SP Setia falls to March low, CLSA downgrades

KUALA LUMPUR: SP SETIA BHD []’s share price hit a low of RM3.84 in late afternoon trade on Friday, July 15, the lowest since early March as analysts downgraded it to underperform.

At 3.28pm, it was down 17 sen to RM3.84 with 2.34 million shares done. KLCCP slipped 10 sen to RM3.40.

The FBM KLCI fell 5.02 points to 1,574.82. Turnover was 431.83 million shares valued at RM756.03 million. There were 185 gainers, 422 losers and 315 stocks unchanged.

CLSA Asia-Pacific Research had downgraded SP Setia to Underperform from Outperform with a revised target price of RM4.30, based on a 10% discount to RNAV of RM4.80. It said this was in line with the discount applied to other property names under its coverage.

“Given that SP Setia is a pure property developer play, we believe that the 10% discount is justified from zero discount previously. We do not see any compelling reason for SP Setia to be valued at a premium compared to the rest of the property companies given that the visibility of the physical property market has been reduced by the mixed signals,” it said.

However, CLSA said it did not change its earnings estimates for FY11 and FY12 as these will continue to be supported by the strong unbilled sales recorded at RM1.8billion as at FY10, which had subsequently increased to RM3billion as at H111.

“For FY13 earnings estimates, we see potential downside risk if the mixed signals above tilted towards more negative outlook. Another potential headwind could be the change in government policy in tightening the lending requirement, which at this stage, still unclear as it remains at the proposal stage,” it said.