BPS's demand, selling price and deliveries have exceeded our expectations. Total GDV could well be GBP10b now.

Phase 1 handover targeted in June 2016 with Sime and SP Setia estimated to recognise lumpy profits of MYR263m each.

Maintain BUY on Sime with unchanged TP of MYR10.20 while SP Setia is a HOLD at a higher MYR3.47 TP (+11sen).

What’s New

We recently visited the Battersea Power Station (BPS) project site exactly two years after we witnessed the Malaysian consortium comprising Sime-SP Setia-EPF (40:40:20) completed the acquisition of the property on 5 Sept 2012 for GBP400m. This time, we were joined by over 10 Malaysian fund managers, for an update.

Despite the initial scepticism by Londoners and fund managers alike, the BPS project took off smoothly and in style. The BPS project team successfully launched Phase 1 and 2 of the residential developments with a combined GDV of GBP1.6b. It is now planning a global tour in conjunction with its upcoming Phase 3 project launch (GBP2.0b in total GDV) in 4Q14.

Development work is on-going for Phase 1. Several tower cranes could be seen at the project site. Other completed works at BPS include a show house built on the shoulder of the BPS historic building, a temporary 6-acre park and sales office.

The BPS project has an original GDV of GBP8b but this may be revised up to GBP10b (though unofficial) due to good selling prices.

On the new Northern Line Extension, we understand the on-site preparation work has been done. The main construction work will start in Mar 2015 and complete in 2019.

What’s Our View

The BPS project has thus far exceeded our expectations, in terms of demand, selling price and project deliveries. Handover of Phase 1 is now scheduled on June 2016 (instead of 2017). We have assumed a PBT margin of 23% for this entire project.

For Sime, we have incorporated Battersea’s Phase 1 (Circus West) development profits of MYR263m into FY6/16 net profit estimate.

For SP Setia, we raise our RNAV estimate to MYR4.96 (+17sen; BPS accounts for 12% of our total RNAV) to factor in the earlier-than- expected profit recognition from Phase 1 (Circus West). Our TP is raised by 11 sen to MYR3.47. Maintain HOLD.