Results

4Q13 core PAT rose 0.2% yoy to RM127.3m, with YTD net profit of RM415m making up 105% and 93% of HLIB and consensus estimates respectively.

Deviations

Slightly ahead of our expectations due to carryover from its strong unbilled sales (RM10.3bn as of 3Q).

Dividends

7 sen DPS was declared in 4Q13, bringing YTD DPS to 11.8 sen, or 83% of our 14.25 sen DPS forecast.

Highlights

Sales target smashed. SPSB’s RM5.5bn FY13 sales target has been convincingly exceeded with record domestic sales of RM5.0bn and overseas sales of RM3.2bn. For its foreign projects, Battersea, Eco Sanctuary (Singapore) and Parque Melbourne all enjoyed extremely robust sales and bookings.

Cautious outlook. However, we note that SPSB did not provide a sales target for FY14, as management acknowledges the headwinds stemming from the recent cooling measures under Budget 2014. We also gathered it is not aggressively looking for new landbank at this point in time, which further supports its cautious stance.

Margin pressure on the horizon. SPSB has been heavily launching lower end products priced below RM400k in Setia Alam, which has posed a drag on margins. Going forward, we expect other cost pressures to weigh on margins, including: (1) Shortage of skilled labour following the crackdown on illegal workers particularly in 4Q 2013; (2) Subsidy removals such as the petrol hike in Sep 2013 and electricity tariff in Jan 2014; and (3) New levies and processing fess introduced by state governments.

Syariah compliance status. SPSB expects to be compliant based on its FY13 accounts, hence it expects to be included in the Syariah list in the next round of review.

Healthy earnings visibility. Unbilled sales of RM9.6bn is 3.4x FY13 property development revenue, and will provide earnings buffer in the face of negative headwinds going into 2014.

Risks

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

Forecasts

Rolling over our numbers, our FY14-15 earnings forecast is reduced by 2.7-3.6%.

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 - 13 Dec 2013