Upgrade to outperform at RM3.59, fair value raised to RM4.10: S P Setia has recorded a stunning real estate sales performance of RM1.65 billion in the financial year ended October 2009 (FY09). This is 50% above its internal sales target of RM1.1 billion. Strong sales momentum continued into November 2009 as the company registered record sales of RM294 million, constituting 18.4% of its FY10 sales target of RM1.6 billion.
The strong sales performance was due to the developer’s attractive financial packages and recovery in the property market. As at October 2009, S P Setia had unbilled real estate sales of RM1.2 billion. This represents one time of our FY10 property development revenue forecast for the company.
We are upgrading our FY10 and FY11 earnings estimates for S P Setia by 2.3% to 4.2% after factoring in income from its four new projects, namely the Brooke Residences in Penang and KL EcoCity in Kuala Lumpur, besides the developer’s initiatives in Vietnam’s Lai Thieu Town and Hangzhou in China.
At the same time, our forecast also took into account, among others, a change in take-up rate and progress billing assumptions for the Sky Residence and Setia Walk projects in Malaysia.
We have also fine-tuned our revised net asset value (RNAV) per share for S P Setia from RM5.22 to RM4.83 as we rolled over our base year to FY10, and took into account the change in land price assumptions for the company’s tract in Johor.
There is strong growth potential from KL EcoCity and we believe the project would propel S P Setia to the next level.
Attaching a 15% discount to S P Setia’s RNAV since the company no longer enjoy the status of being the most liquid property stock, our indicative fair value for shares of S P Setia was raised to RM4.10 from RM3.93. Hence, a rating upgrade for the stock to outperform.
Despite S P Setia’s aggressive ventures in Vietnam and China, the company will still focus on the Malaysian market as its overseas projects are still in infancy.
In FY09, more than 95% of the company’s real estate sales and unbilled sales were derived from local projects and this is expected to be the same in FY10. — RHB Research Institute, Dec 11
About Me
- Nuang
- Ibrahim bin Ramli@Nuang started his career with CIMB Wealth Advisors Berhad as Agency Manager in April, 2008.Previously he was an Internal Auditors and Accounts Executive with Perodua Sales Sdn Bhd since 17 August, 1994. His background:- 1.Certified of Achievement for Master Sales Leadership from Dr Lawrence Walter Ng of President of The Art Of Learning and International Of Learning Without Learning 2.Certified for eXtra Ordinary Performance of Lawrence Walter Award Certificate for One Million Ringgit Club 2007 3. Certified Life & General insurances 4. Conferred with Diploma in Business Studiess & Bachelor of Business Admin(Hons)Finance from UiTM, Terengganu Branch & Shah Alam respectively;
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