S P Setia's RM4b sales target achievable, but sales has declined over the years

KUALA LUMPUR (Dec 11): Analysts had mixed views over S P Setia Bhd's prospects. While some expected the Permodalan Nasional Bhd-owned property developer could achieve its sales target of RM4 billion for its financial year ending Dec 31, 2015 (FY15), there were others who pointed out S P Setia's declining sales over the years.

CIMB Research's head equity research Terence Wong, who maintained a "reduce" call on S P Setia with a target price of RM2.86, said the property giant's 12MFY15 sales of RM3.45 billion were 25% lower than a year earlier.

Note that S P Setia in June changed its financial year end to December, from October previously. Its RM4 billion sales target was for the 14 months ended Dec 31, 2015 (14MFY15).

Wong in a note today said that S P Setia's total property sales in Malaysia for 12MFY15 worth RM2.2 billion were 22% lower year-on-year.

"S P Setia is not alone in (experiencing) the steep fall in new sales this year as most developers have suffered the same fate and have cut their sales targets considerably. But for S P Setia, its overseas sales have also fallen 31% year-on-year to RM1.25 billion with London sales easing 8% year-on-year to RM1.09 billion and Australia sales declining 96% year-on-year to RM21 million," he noted.

"S P Setia has suffered two years of sales declines and remains a 'reduce'. (There are) no changes to earnings per share forecasts and target price basis of a 40% discount to revised net asset value," he said.

TA Securities, however, believed there is more upside to S P Setia. The research house maintained a "buy" call with an unchanged target price of RM3.70. This was based on valuation of 12 times projected calendar year 2016 earnings per share.

"We believe the group is on track to achieve its FY15 sales target of RM4 billion, driven by resilient sale of affordable landed and high-rise properties," said TA analyst Thiam Chiann Wen.

"Specifically, we expect the recent launches in Setia Alam (Fusca terrace house, which were fully sold), Setia EcoPark (Elizabeth Spring Semi-Ds, fully sold, and Victorian Spring Bungalows, 70% sold) and Setia Ecohill (D'Cerrum and D'Çasia, apartments, fully sold) to contribute to the final two months of FY15 sales," he said.

On average, analysts have a target price of RM3.57 on S P Setia, Bloomberg data showed. Eight had "buy" calls, 10 recommended "hold", while three gave "sell". At 11:27am, S P Setia's counter shed one sen to be traded at RM3.09. -- theedgemarkets.com

Do not ask your neighbour about the value of your home. Click here at The Edge Reference Price to find out.