Sales for the Battersea project may remain slow, given the upcoming supply in the Nine Elms area and the stamp duty hike in the UK last year. While SP Setia’s debt exposure in foreign currency terms is minimal, cash flow may be tight for this project due to the scale of development. We maintain NEUTRAL, with a TP of MYR3.10 (from MYR3.50, 7% upside), as property markets in Malaysia and London continue to stay weak.

14M sales reached MYR4.3bn, beating management’s MYR4bn estimate. The improvement in sales in November-December was mainly driven by projects from the Klang Valley, such as Setia Alam, EcoHill and Eco Glades. Overseas sales made up 33% of the total. Sales for Battersea Power Station (BPS) Phase 3A remained subdued, at 59% (from 57% in October).

Pipeline launches. SP Setia has set a MYR4bn sales target, and will roll out two township projects in FY16, including Eco Templer and EcoHill 2. The medium-density Setia Sky Seputeh serviced apartments will also enter the market, for which we think sales may be slower due to the higher pricing.

Forecasts. We raise our FY16-17 earnings forecasts by 14-15%, in view of the several completions of projects such as Setia Alam, EcoHill, Eco Park and Eco Glades (worth a combined MYR1bn), the handover of the Eco City strata titles(MYR306m), and Eco Sanctuary Singapore (SGD473m) in 2H16 . Parque Melbourne (AUD247m) and BPS Phase 1 (GBP846m) could also be completed by year-end. Unbilled sales were at MYR9.2bn (vs MYR9.5bn in 4Q15). Key risks include delays in launches and worse-than-expected market conditions.

Maintain NEUTRAL. We maintain our NEUTRAL rating but cut our TP to MYR3.10 from MYR3.50, based on a larger 35% (from 20%) discount to our updated RNAV estimate. This is to reflect the potential risk of the Battersea project and the weak property market in Malaysia.

Above expectations. SP Setia’s 5QFY15 results, which only cover two months – Nov and Dec 2015 – beat our and market expectations. Full-year earnings were largely boosted by the completion of Fulton Lane in 3Q15/4Q15. Meanwhile, a single-tier 19 sen final DPS was declared.