S P Setia Bhd
(Dec 17, RM5.54)
Maintain buy at RM5.55 with fair value of RM6.80: We are maintaining our “buy” rating on S P Setia Bhd with our fair value unchanged at RM6.80, based on a 5% discount to our fully-diluted (FD) net asset value estimate of RM7.16 per share.
S P Setia’s latest figures — November sales of RM295 million — show that sales momentum remains strong. This represents a solid 47% growth month-on-month, although stable vis-a-vis the same month last year.
Sales continue to be driven by township projects in the Klang Valley, Setia Eco Park and Setia Alam, where there is still ample land available — a combined area of about 1,400 acres with remaining gross development value (GDV) of RM5 billion to RM6 billion.
We expect S P Setia to generate record high pre-sales of RM3 billion, to be underpinned by its two integrated commercial projects, KL Eco City and Setia City, apart from the existing township developments.
We believe the market may have under-appreciated the deeply embedded value of KL Eco City, given the current bearish consensus view on condominium and office space due to concerns about supply.
KL Eco City, with a GDV of RM6 billion, or an average price of RM1,000psf, is targeted for official launch in January or February 2011. The group will kick things off with the development of the strata and boutique offices. The first of the three residential towers may be launched sometime in June 2011, with about 711 units on offer at prices between RM900 and RM1,200 psf.
Despite all the recent M&A activity in the property sector, S P Setia will continue to be among the favourites for investors given its excellent track record and solid execution. — AmResearch Sdn Bhd, Dec 17
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