INVESTMENT HIGHLIGHTS

• 9MFY17 earnings within expectation

• Secured RM2.82b sales in 9MFY17

• I&P acquisition and corporate exercises to complete by end FY17

• Maintain sales target of RM4.0b for FY17

• Maintain BUY with TP of RM4.13

9MFY17 earnings within expectation. 9MFY17 core net income met expectation as it accounted for 71%/70% of our/consensus forecast. As expected, no dividend is announced in the 3rd quarter.

Secured RM2.82b sales in 9MFY17. The 9MFY17 sales makes up 71% of management and our full year target of RM4.0b. Local projects contributed RM1.66b or 59% of the total sales with the remaining from international project. Unbilled sales of RM7.05b provide earnings visibility for 1.4 years.

I&P acquisition and corporate exercises to complete by end FY17. We reiterate our view that the I&P acquisition is RNAV accretive as we estimate that the market value of its landbank is RM6.15b (against its purchase price of RM3.65b). Hence, we believe that the corporate exercise which is expected to raise a total RM3.6b should be viewed positively by the market. Recall that SPSETIA has proposed: i) rights issue, ii) rights issue of new class B Islamic Redeemable Convertible Preference Shares, and iii) private placement. After the completion of I&P acquisition and corporate exercises, SPSETIA market cap should be boosted to between RM14.0b to RM15.0b which we think is the right size to join FBM KLCI (assume improving share liquidity from the private placement and higher market cap).

Maintain BUY with TP of RM4.13. Our earnings forecasts are maintained for FY17 and FY18. Our Target Price is unchanged and it is based on 10% discount to RNAV. We continue to like SPSETIA as we expect the Company to join FBM KLCI next year (a catalyst for valuation rerating) and its good dividend yield of 5.6%.

Source: MIDF Research - 10 Nov 2017