Results

2Q13 core PAT rose 6% yoy to RM95.8m; YTD earnings of RM185.9m made up 38% and 40% of HLIB and consensus estimates respectively.

Deviations

We deem results inline as 1H tends to be seasonally weaker for SPSB. Historically, 1H accounted for 36- 42% of full year earnings.

Dividends

1.6 sen per share less income tax of 25% and 2.4 sen single tier dividend.

Highlights

Strong 2Q sales… 1H sales (as at Apr 2013) came in at RM2.83bn, which places SPSB on-track to achieve its RM5.5bn sales target for FY13. Sales up to May came in at RM4.37bn, or 80% of full-year sales target, of which 29% comes from Battersea Power Station.

Updates on Battersea... Phase 2 will comprise of apartments situated above the original power station, going for £2,000 psf. Also, more than 95% of the sold units for Phase 1 already have their SPAs signed.

Management continuity… Following confirmation of Tan Sri Liew’s imminent departure by Mar 2015 at the latest, more than 200 staffs have departed the company. However, we believe that the remaining staff force of 1,700 should able to cope with the shortfall in the interim.

Creating new market segment… SPSB has launched 3,000 units of new medium cost apartments (Seri Jati, circa RM200k/unit).

Project updates… Setia Federal Hill @ Bangsar is slated to launch at end FY14 at RM1,500 psf. Meanwhile, Setia Ecohill @ Rinching will launch end FY13 / early FY14. Phase 1 comprises of double storey terrace houses costing below RM500k / unit and semi-d’s priced below RM900 / unit.

Healthy earnings visibility. Unbilled sales have risen to RM8.7bn (3.8x FY12 property development revenue).

Risks

Slowdown in sales; escalation in construction and raw material costs; delays in launches.

Forecasts

Maintained.

Rating

HOLD 

Positives: Strong product concepts and pipeline; consistent dividends.

Negatives: No longer the most liquid property stock in Malaysia.

Valuation

Maintain TP at RM3.35 (maintain 25% discount to FD RNAV), due to lack of fresh rerating catalyst as well as limited upside with the current negative sentiment surrounding the property sector. Maintain HOLD

Source: Hong Leong Investment Bank Research - 28 Jun 2013