Analysts expect strong 4Q for S P Setia after Battersea Power delivers in 9M17

KUALA LUMPUR (Nov 10): S P Setia Bhd is expected to see strong results for its fourth quarter for financial year ending Dec 31, 2017 (4QFY17) after its core earnings for the first nine months of the financial year ending Dec 31, 2017 (9MFY17) came in stronger on year-on-year basis, supported by substantial higher earnings from the Battersea Power Station project, according to both Hong Leong Investment Bank (HLIB) Research and CIMB Equity Research.

HLIB Research said in its note that with the completion of Battersea phase 1 in October this year, S P Setia will focus to ramp up local sales with more launches of mid-range landed products in the group’s flagship township moving forward. Among the townships which still see underlying demand are Setia Alam, Setia Ecohill, Setia Eco Templer and KL Eco City.

Similarly, CIMB Equity Research is positive that S P Setia could achieve its FY17 sales target of RM4 billion as the Group plans to launch projects with a combined gross development value (GDV) of RM2 billion in the fourth quarter this year.

CIMB Equity research added that S P Setia recorded sales of RM2.8 billion in 9MFY17, which accounted for 70% of its total full year target sales.

“Its overseas projects were the star performer, accounting for over 41% of 9MFY17 sales. This was mainly driven by Sapphire by the Gardens Luxury residential apartments in Melbourne which raked up a strong take-up rate of 83% in less than four months. S P Setia’s total unbilled sales stood at RM7.1 billion at end-September 2017, translating into 1.4 times its FY16 revenue,” it noted.

HLIB Research also said the unbilled sales of RM7.1 billion could sustain S P Setia's earnings visibility for the coming years.

Both HLIB Research and CIMB Equity Research see the acquisition of I&P Group Sdn Bhd as overall long-term positive. HLIB said the acquisition will potentially drive S P Setia to become the largest pure property player in the market while CIMB Equity Research pointed that it would result in S P Setia becoming Malaysia’s third largest property developer by land bank size.

CIMB Equity Research however noted the medium-term concern on potential dilution to its earnings arising from issuance of up to RM1.2 billion rights shares and the RM1.2 billion share placement.

CIMB Equtiy has a hold call for S P Setia with a target price of RM3.40 while HLIB Research has a buy call for the property player with a target price of RM4. As at writing, SP Setia slipped by 0.3% to RM3.29 with about 1.7 million shares changing hands, giving it a market capitalisation of RM9.9 billion. — theedgemarkets.com

For more stories, download EdgeProp.my pullout here for free.