• Within expectations
2QFY10 net profit came in at RM51.2m while 6MFY10 numbers were at RM89.4m. On an annualised basis, SP Setia’s results achieved 91% and 89% of house and consensus full year estimates respectively. We deemed the results to be within expectations as we expect 2HFY10 to be stronger. A first interim net dividend of 4.5 sen has been declared. We expect another 7 sen to be declared in 4QFY10 based on 60% dividend payout assumption
• Margins improved but remain below trend
6MFY10 revenue and net profit were 19.1% and 24.7% higher respectively than corresponding period last year on the back of strong property sales. While EBIT margin remains below trend, it has improved from 14.2% in 6MFY09 to 16.5% as the effect of higher building materials
waned. On-going sales promotion expenses will however keep margin below 20% in the near term.
• On track to achieve RM2bn sales target
Property sales continued to be strong in 2QFY10 at RM595m which was just a notch lower than the record RM608m achieved in 1QFY10 but 42% higher y-o-y. SP Setia is on track to achieve its RM2bn sales target as it has already achieved RM1.4bn for 7MFY10.
• Maintain BUY
We maintain our BUY call and target price of RM4.46 based on upper-end P/E valuation of 20x on CY11 earnings. RNAV also remains unchanged at RM4.32. We like SP Setia for exposure to the landed residential property sub-segment which is currently in a sweet spot. Sales are expected to be strong amid accommodative interest rate environment and improving consumer sentiments.
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