Results

• 1Q17 revenue of RM940.2m translated into PATAMI of RM105.2m, accounting for 15.2% and 14.2% of HLIB and consensus estimate.

Dividends

• None.

Deviation

• The result is deemed in-line as we expect stronger 2H17 with handover of another 9 blocks from Battersea Power Station Phase 1.

Highlights

• QoQ: Revenue dropped by 46.9% mainly due to high base effect resulted from the handover of Parque Melbourne for RM711m in 4Q16. PATAMI contracted by 75.2% to RM105.2m as 4Q16 was elevated by the contribution from partial delivery of Battersea Power Station Phase 1.
• YoY: Revenue increased by 3.5% mainly due to progressive recognition from new projects such as Setia Ecohill 2, Setia Eco Templer, Perumahan Penjawat Awam 1Malaysia (PPA1M) and Setia Sky Ville. However, PATAMI contracted by 14.8% mainly due to lower other income (-45.2% yoy) in the absence of forex gain on foreign denominated debt.
• For the first four months, total new sales achieved stood at RM801m (+15.1% yoy) with 82% from local projects. The sales are deemed within full year sales target of RM4bn given the festive period and shorter month of February.
• RM571m worth of GDV was launched in 1Q17, including both TRIO by Setia and Bukit Tinggi, Klang. Both projects have commendable take-up rate of approximately 60% since the launch in April.
• Moving forward, sales will be supported by the planned launches in the pipeline worth some RM4.5bn including Setia EcoHill 2 (GDV: RM294m), Setia Sky Seputeh Tower B (GDV: RM478m), KL Eco City (GDV: RM615m) and Setia Seraya Residences (GDV: RM278m).
• On international front, the company plans to launch Exhibition Street (GDV: AUD478m) and Prahran (GDV: AUD38m) in Melbourne.
• Prospects remain intact with total unbilled sales of RM7.8bn which will sustain its earnings visibility for coming years.

Forecasts

• Unchanged.

Rating

BUY ↔

• We believe investor’s sentiment towards SP Setia will improve as the proposed acquisition of I&P Group is expected to be RNAV accretive, synergistic in the long run and potentially become the largest pure property player in the market. Consistent dividend yield of 5% is another positive point.

Valuation

• Maintain BUY with unchanged TP of RM4.00 based on unchanged 30% discount to RNAV of RM5.71.

Source: Hong Leong Investment Bank Research - 12 May 2017