SP Setia seen hitting RM3bil sales target

Shares of SP Setia Bhd, the largest property stock on Bursa Malaysia, rose 5 sen to RM4.15 after meeting earnings expectation for the half way mark of its financial year with analysts confident the company would be able to meet its full year sales target of RM3bil.

Sales for the second quarter and the first half had surpassed previous highs, and revenue for the seven months of its financial year ending October 2011 was already higher than any other full year except for its 2010 financial year.

“Current unbilled sales have touched a record RM3.2bil following strong year-to-date (7 months) pre-sales of RM1.66bil. Setia is very much on track to meet its sales target of RM3bil,” said AmResearch in a note yesterday.

CIMB Investment Bank in a report said some 57% of the sales came from the Klang Valley.

“The four townships in Johor contributed huge sales of RM510mil or 36% of the total while Penang chipped in 7%. The Johor sales were very commendable, being an unprecedented RM1bil on an annualised basis compared with past sales of RM400mil to RM500mil per annum,” it said.

“SP Setia's second half sales should exceed first half sales comfortably as sales from KL EcoCity should be considerable.”

Expected to drive sales this year will be the company's KL Eco-City project. HwangDBS Vickers Research in its note said KL Eco-City's RM1.8bil worth of bookings from boutique and strata offices and recent condo tower launch at an average selling price of RM1,200psf, which was a 40% premium to adjacent properties, should be converted soon, following the signing of S&P agreements from mid-June onwards with the completion of DBKL's land privatisation exercise.

It pointed out that other launches to watch were V Residences and Brook Residences (with a gross development value of RM233mil), Fulton Lane@Melbourne with a projected GDV of RM1.4bil and Aeropod@ Kota Kinabalu (projected GDV of RM1bil but is awaiting approvals).

“SP Setia will be one of the biggest beneficiaries of the mass rapid transit with 25% of RNAV exposed to potential interchanges ie KL Eco-City and Jalan Bangsar (near KL Sentral),” said Hwang DBS.

It said SP Setia could be involved with more landbanking deals. Hwang DBS said SP Setia has been the most aggressive developer with four acquisitions year-to-date with a GDV of RM15bil.

AmResearch expects land acquisitions to be the primary valuation driver. “Based on its township track record, SP Setia would be the leading candidate to co-develop a parcel of the prime residential land in Sg Buloh with EPF-owned Kwasa Land, leveraging on its successful Eco Park brand,” it said.

“We are expecting stronger newsflow on this front in the next few months. It is also bidding for the 100-acre seafront land in Bayan Mutiara, Penang believed to be valued at over RM900mil including reclamation cost, and a potential GDV of over RM5bil,” said the report. - By Jagdev Singh Sidhu (The Star)

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