SP Setia upgraded to Buy, new TP of RM1.68


  • Analyst Reports
  • Thursday, 14 Nov 2019

Overseas projects contributed RM204mil in sales during the quarter, mainly driven by the UNO Melbourne project.

KUALA LUMPUR: RHB Research has upgraded SP Setia to Buy from Neutral with a new target price pf RM1.68. Its last traded price was RM1.35.

It said on Thursday SP Setia’s 3Q19 results were in Iine. The 9M19 new property sales reached RM3.07bil.

“We believe 4Q19 sales should hit RM1.5bil, picking up before the Home Ownership Campaign ends. Management also plans to feature more landed properties in its remaining launches in 4Q19.

“As current valuations have overshot historical trough valuations, we upgrade the stock to Buy, ” it said.

Commenting on the 3Q19 headline net profit, RHB Research said it was boosted by a realised forex gain of RM37.8mil, due to the redemption of a pound sterling-denominated loan during the quarter.

The sequential decline in revenue and earnings stemmed from the RM449mil sale of the former British High Commission land in 2Q19, of which SP Setia took in an estimated net gain of c. RM100mil.

Unsold completed inventory inched up slightly to RM1.44bil, from RM1.4bil in the previous quarter. Net gearing remained relatively unchanged, at 0.56 times.

RHB Research said new property sales were at RM1.09bil vs RM1.26bil in 2Q19, bringing the 9M19 total to RM3.07bil (inclusive of a RM87mil land sale).

Key sales contributors during the quarter include Setia Alam, Setia Safiro, Bandar Kinrara, Sky Ville Jelutong and the newly-launched Phase 1 in Setia Fontaines in Mainland Penang.

Overseas projects contributed RM204mil in sales during the quarter, mainly driven by the UNO Melbourne project.

“Management is maintaining its RM4.55bil sales target for the year. We think it could reach its target, as there are still RM2.17bil worth of new launches in 4Q19, as well as RM1.4bil in unsold inventory.

“Sales should pick up slightly before the end of the Home Ownership Campaign in December, ” it said.

RHB Research said the pipeline launches will mainly be concentrated on landed properties in established townships in the Klang Valley and Johor Bahru, such as Setia Alam, Eco Hill, Eco Templer, Eco Garden and Setia Tropika. The company will also kickstart Setia Warisan Tropika in mid-November, which is the latest township project in Bandar Baru Salak Tinggi.

“We maintain our FY19-21 earnings forecasts. Including the Battersea Power Station commercial plot that was sold en bloc, unbilled sales stood at RM10.52bil (local: RM3.48bil, international: RM7.04bil) in 3Q19, vs RM10.665bil as at 2Q19, ” it said.


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