Results

• 1QFY15 PATAMI of RM101.3m came in within expectations, accounting for 18.5% and 16.3% of HLIB’s and consensus’ estimates, respectively.

• To note, SPSB’s 1Q results usually accounts for only 15-23% of its full year earnings due to seasonality.

Deviations

• Broadly in-line.

Dividends

• None.

Highlights

• Revenue increased 28.3% yoy largely due to the 22.0% yoy jump in contribution from property development as progress development works increases.

• PBT however grew only 4.7% yoy as property development declined by 3.0%. This is mainly due to the mismatch between initial expenses incurred and revenue recognition for projects in UK and Australia, higher selling and marketing expenses for Battersea Power Station Phase 3A and early recognition of GST financial impact of RM22.7m.

• SPSB achieved RM1.02bn sales (domestic: RM250m, international: RM769m) in 1QFY15 (4QFY14: RM922m; 1QFY14: RM1.6bn). YTD, the group’s sales totaled RM1.2bn (up to 28 Feb 2015).

• The main contributor to SPSB’s international sales for the quarter remains to be Battersea Power Station at RM737m. For domestic sales, the group witnessed strong demand for its mid-priced range products, particularly in Klang Valley.

• Unbilled sales currently stood at RM11.5bn, represents 3.02x FY14’s property development revenue. We believe this will provide earnings resilience in the face of potential negative headwinds post implementation of GST in April 2015.

Risks

• Slowdown in sales;
• Escalation in construction and raw material costs; and
• Delays in launches.

Forecasts

• Unchanged.

Rating

HOLD

Positives

• Strong product concepts and pipeline;consistent dividends.

Negatives

• No longer the most liquid property stock in Malaysia.

Valuation

• Target price remained unchanged at RM3.45 (maintain 35% discount to RNAV), which values SPSB at 14.8x FY15E P/E, vs. 18x for IOIPG and UEMS.

Maintain HOLD.

Source: Hong Leong Investment Bank Research - 12 Mar 2015