SP  Setia's  1HFY12  results  were  within  our  and  consensus  expectations, accounting for 48.4% and 46.5% of our and consensus' FY12 net profit forecasts. Y-o-y  revenue  was  9.2%  higher  while  net  profit  rose  by  a  smaller  7.9%  due  to  a slightly higher effective tax rate. We maintain our forecasts and Trading Buy call, with an unchanged FV of RM4.34, based on 2.3x FY12 P/NTA, which is equivalent to the stock's 5-year historical average P/NTA.

Largely  within.  SP  Setia's net profit of RM166.4m for 1HFY12  made  up  about  48.4% and 46.5% of our and consensus' expectations. Revenue went up by 9.2% y-o-y, attributed to higher progress billings from its on-going projects. However, net profit grew
at a slower 7.9% y-o-y owing to a higher effective tax rate of 28.8% in 1HFY12 vs 25% in  1HFY11.  In  1HFY11,  SP  Setia  recorded  a  gain  on  disposal  of  investment  property estimated  at  about  RM30m.  Excluding  this  gain,  its  core  net  profit  would  have  been higher  by  more  than  20%  y-o-y,  supported  by  improved  margins.  The  ongoing projects which contributed to the company's bottom-  and  top-lines  were  Setia  Alam  and  Setia Eco-Park,  Setia  Walk,  Setia  Sky  Residences,  Bukit  Indah,  Setia  Indah,  Setia  Tropika and  Setia  Eco  Gardens  in  Johor  Bahru  and  Setia  Pearl  Island,  Setia  Vista  and  Setia Greens in Penang. Due seasonal factors, the company's 2QFY12 revenue and net profit surged 36.5% and 24.8% q-o-q respectively.

1HFY12 new sales hit RM1.81bn. SP Setia has set a sales target of RM4bn for FY12. As at end-1HFY12, it had locked in RM1.81bn worth of new sales, which was about 29% higher  y-o-y.  The  strong  sales  performance  in  FY12  was  due  to  a  combination  of sustained  sales  contribution  from  its  established  projects  in  the  Klang  Valley,  Johor Bahru and Penang, as well as sales from KL Eco City and 18 Woodsville in Singapore, which  were  launched  recently.  As  its  maiden  foray  into  East  Malaysia  via  Aeropod  in
Sabah  also  registered  strong  take-up,  we  expect  the group's sales performance in 2HFY12 to strengthen further.

Maintain Trading Buy. We maintain our forecasts and Trading Buy recommendation on SP Setia,  with  an  unchanged  FV  of  RM4.34,  based  on  2.3x  FY12  P/NTA,  which  is equivalent  to  its  5-year  historical  average  P/NTA.  We  believe  the  strong  financial backing from its shareholders should enable SP Setia to enlarge its presence overseas.

Source: OSK