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SP Setia Reaffirm NEUTRAL
Unchanged Target Price (TP): RM3.99
We recently visited some key developments by SP Setia in Johor. Some of the notable projects we visited were Setia Tropika, Setia Eco Garden and
Bukit Indah. Below are the takeaways of the visit:-
* Average take-up rates remains strong. SP Setia Bhd (SPSB) has 3 key projects in Johor:-
a) Setia Tropika at 50%-60%
b) Setia Eco Garden
c) Bukit Indah – Matured development.
* New features for affluent purchasers. Apart from the location and well-placed infrastructure, the premium pricing by SPSB is justified with the inclusion of new features such as lifestyle amenities (eg: eateries eg: Starbucks in Setia Tropika), higher house platform (situated 1m – 1.5m above ground levels), reflection ponds, central gated system etc.
* Johor remains key contributor to earnings. Johor contributes up to 50% of SPSB’s revenue. The development of SP Setia’s high-end products with higher profit margins, especially from its Setia Tropika and township development of Setia Eco Park, will continue to be its major earnings contributor.
* Southern region market leader. SP Setia remains the leading property developer in JB followed by KSL Holding and the Mah Sing Group. Nevertheless, the local Johorean developers are still vital given their present strategic landbank holdings.
* Maintain NEUTRAL with TP of RM3.99 based on a 30% discount to RNAV. The counter is currently trading at 17.2x EPS10, between its 5-year range between 10.7x – 20.1x but above peers’ average PER of 16.9x.
