SP Setia’s 4Q15 results were in line with expectations. We maintain our NEUTRAL call with an unchanged MYR3.50 TP (13% upside). While domestic property sales improved during the quarter, overseas markets remain challenging as the take-up rate for BPS Phase 3A has not improved. The UK housing market could be further hit by the recent stamp duty hike. We adjusted our FY15 earnings forecasts due to a change in FYE from October to December.

Within expectations. SP Setia’s 4Q15 results met our and market expectations. The QoQ drop in revenue was mainly due to a higher portion of handovers of Fulton Lane Melbourne that was completed in the previous quarter. Meanwhile, bottomline was dragged down by a higher percentage, due to certain non-tax deductible expenses and a higher tax rate in Australia, leading to a higher effective tax rate.

12M sales hit MYR3.45bn. 12M15 new sales hit MYR3.45bn vs 9M’s MYR2.54bn. Sales saw an improvement in the Aug-Oct quarter, mainly from the local projects across the region. The company, hence, should be able to achieve its MYR4bn sales target for FY15 (14 months). Overseas sales made up 36% of the total, and this segment appeared to be stagnant as sales for Battersea Power Station (BPS) Phase 3A have not improved materially, currently staying at a 57% take-up since its launch in Oct 2014. In our view, this subdued performance is likely to continue due to the impact of the severe MYR weakness on Malaysian buyers, as well as the upcoming supply of residential units in the Nine Elms area. Furthermore, the property stamp duty in the UK was justraised by an additional 3% last month for property bought as a second home or buy-to-let. We expect this to exert pressure on the London housing market at least over the next six months. Domestically, 2H sales in the Johor region have picked up by about 70% HoH given the low base last year, while sales in the Klang valley region grew 14% HoH.

Forecasts and risks. We adjust our FY15 earnings forecasts due to achange in FYE to December. Unbilled sales of MYR9.5bn (vs MYR9.9bn in 3QFY15) should continue to underpin earnings. The key risks to our forecasts would be a substantial pick -up in economic growth and strong recovery in the property market.

Maintain NEUTRAL. We maintain our NEUTRAL rating and TP ofMYR3.50, based on an unchanged 20% discount to RNAV.