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Tuesday January 15, 2013

Powered by London Battersea SP Setia seen hitting RM5.5bil sales this year

<B>Iconic project:</B> The launch of Battersea Power Station development in London, where it was reported that 50 buyers had queued in the morning before the launch of the £8bil (RM38.8bil) mixed development, a situation unprecedented for London, with all 200 units allocated snapped up. Iconic project: The launch of Battersea Power Station development in London, where it was reported that 50 buyers had queued in the morning before the launch of the £8bil (RM38.8bil) mixed development, a situation unprecedented for London, with all 200 units allocated snapped up.

PETALING JAYA: SP Setia Bhd should comfortably hit its RM5.5bil sales target this financial year, with the headline-grabbing Battersea Power Station redevelopment project acting as its tour de force.

Hwang DBS Vickers Research was positively surprised by the large turnout at SP Setia's Battersea launch in Kuala Lumpur last Saturday, citing the London development as an important catalyst for the company to reach its targets.

Yesterday, SP Setia's counter picked up on the positive news to close at RM3.16, four sen or 1.28% higher on a volume of 1.1 million shares.

“We view (the large turnout) positively, as Battersea should help SP Setia achieve its RM5.5bil financial year 2013 (FY13) sales target (with a 30% increase year-on-year) and double its earnings by 2016 to 2017 onwards,” Hwang said. The research house expected Battersea to contribute RM1.25 per share, or 23% of realisable net asset value (RNAV), assuming a 30% profit-before-tax margin on a 15-year development period.

It added there could be potential upside, as chief executive officer Tan Sri Liew Kee Sin was quoted to be expecting the development to be accelerated to eight years.

Maybank Investment Bank Bhd called the response overwhelming, with units launched in both London and Malaysia fully booked, reflecting a 75% take-up rate of the total 800 units under phase one since the land was purchased a mere four months ago.

“The strong bookings are not surprising, given the site's strategic location at one of the world's most iconic buildings, supported by a future Northern Line extension. We forecast sales of RM5.7bil in 2013, 24% of which will be from Battersea, in comparison with the management's target of RM5.5bil.”

In London, it was reported that 50 buyers had queued in the morning before the launch of the £8bil (RM38.8bil) mixed development, a situation unprecedented for London, with all 200 units allocated snapped up.

The research house believes that the upcoming launches in Singapore and Hong Kong would receive similar response.

“The consortium will launch the remaining units in Singapore on Jan 19, followed by Hong Kong a week later. The success in London and Malaysia should enhance buying interest in future launches, we believe.”

M&A Securities has also made a buy' call on the company, following news reports that SP Setia expected phase one of the project to be sold out by April or May.

Battersea's first phase, known as Circle West, will have 110,000 sq ft of retail space to be retained by the developer consortium, made up of SP Setia, Sime Darby Bhd and the Employees Provident Fund (EPF), for recurring income.

Meanwhile, preparatory work on Circle West, two residential apartment blocks on a single podium, has begun, with construction expected to commence in the second half of this year, coinciding with the start of the power station's redevelopment.

The site will also include a six-acre riverside park that will provide direct access to Battersea Park and Chelsea via a new riverside pathway adjoining the current River Thames Walk. Circle West is expected to be completed by 2017.

Meanwhile, Battersea Power Station Development Company (BPSDC) said approximately 600 of the apartments and townhouses in phase one have already been reserved since sales commenced in London on Jan 9 followed by in Kuala Lumpur on Jan 12.

Sales exhibitions of phase one now continue in other international markets in response to the widespread pre-launch registered interest shown in the development, said BPSDC in a statement. BPSDC is a wholly owned subsidiary of the project owner, Battersea Project Holding Company Limited, which, in turn, is a joint-venture company ultimately owned by SP Setia (40%), Sime Darby (40%) and the EPF (20%).

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