Results

• Within Expectation: 9M17 revenue of RM2.6bn translated into PATAMI of RM494.7m came in within our expectation at 71.3% but below consensus at 65.6% of full year estimates.

Dividends

• None as dividend is usually declared on semi-annual basis.

Deviation

• None.

Highlights

• QoQ: Revenue was up 6.0% with higher contribution on ongoing projects while PATAMI increased by 85.8% given the higher contribution from delivery of Battersea.

• YoY: Revenue decreased by 33.3% mainly due to the completion of major projects such as Parque Melbourne in Australia, Eco Sanctuary in Singapore and KL Eco City at Jalan Bangsar. However, PATAMI grew by 88.9% to RM253.2m mainly driven by the handover of Battersea Phase 1.

• YTD: Revenue came in lower by 19.1% given that major projects were completed last year and some of the ongoing projects are still in the early stage of construction resulting from the repositioning of launches. However, PATAMI came in stronger (+29.1%) thanks to the higher contribution from Battersea Phase 1.

• As at 9M17, total new sales achieved stood at RM2.8bn (+38.2% yoy) with 41% from international sales, largely contributed by the launch of Sapphire in Melbourne (RM871m with 83% take-up). The total sales are on course to meet full year target of RM4.0bn supported by another RM2.0bn worth of launches in 4Q17.

• With the completion of Battersea Phase 1 in Oct 17, moving forward, the focus is to ramp up local sales with more launches of mid-range landed products in the group flagship townships where underlying demand is still favourable such as Setia Alam, Setia EcoHill, Setia Eco Templer and KL Eco City.

• The earnings prospects remain intact underpinned by total unbilled sales of RM7.1bn (cover ratio of 1.7x) which will sustain its earnings visibility for coming years.

• Besides, the proposed synergistic acquisition of I&P Group and fund raising activities are expected to be completed by Dec 17 should all the proposals being approved in the upcoming EGM on 16 Nov 2017.

Forecasts

• Unchanged.

Rating

BUY ↔

• We believe investor’s sentiment towards SP Setia would improve as the proposed acquisition of I&P Group is RNAV accretive and it will potentially drive them to 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 a 30% discount to RNAV of RM5.67 given the accretive major corporate exercise which has long-run synergy.

Source: Hong Leong Investment Bank Research - 10 Nov 2017