Results

• Broadly Inline : Reported 9MFY16 PATAMI of RM383m, accounting for 59% and 57% of HLIB’s and consensus estimate.

Dividends

• None.

Deviation

• We expect stronger 4QFY16 earnings with handover of Parque Melbourne (RM695m) in 4Q16, Eco Sanctuary (completion by end-2016) and part of Phase 1 of Battersea Power Station.

Highlights

• YoY: There are no comparative figures for the YoY due to change of financial year end from Oct to Dec.

• QoQ: Revenue increased by 25% mainly due to higher contribution from on-going property development. However, PATAMI only improved by 7% due to higher tax rate of 41% (mainly due to delay in taxation from previous year).

• New sales increased by 18% QoQ to RM942m (versus RM799m in 2QFY16), mainly driven by Setia Eco Templer, Setia Alam, Setia Ecohill and Bukit Indah. For the ten months ended Oct 16, sales achieved RM2.4bn, accounting for 70% of full year sales target of RM3.5bn. Management remains confident to achieve its full year sales target in view of the strong take up of ViiA Residence and Setia Sky Seputeh coupled with RM1bn worth of launching for the rest of the year.

• The recent launched of ViiA Residence (GDV: RM407m) and Setia Sky Seputeh (GDV: RM458m) witnessed commendable take up rate of 45% and 30% respectively given its lifestyle and strategic location. SP Setia had delayed launching of some of its apartment (such as Trio by Setia (GDV: RM220m) at Klang and replaced with mid price range landed properties and retail lots.

• For the remainder of the year, SP Setia will launch RM1bn worth of projects including condo at Setia Sky Ville, 3 storey terrace and semi D in Setia Alam, Rumah Mampu in Setia Eco Gardens and retail shops in SetiaEcoHills.

• Take up rate for Battersea Phase 3A remained slow, with merely 5 units sold in 3Q16.

Forecasts

• Unchanged. Key risk is delay in delivery of Phase 1 of Battersea Power Station.

Rating

HOLD ↔

• It is currently trading at close to average P/RNAV band with consistent dividend yield of 4%. Potential upside would emanate from further landbanking activities and potential M&A opportunities.

Valuation

• Maintain HOLD with TP unchanged at RM3.11 based on unchanged 35% discount to RNAV of RM4.78.

Source: Hong Leong Investment Bank Research - 16 Nov 2016