PP 7767/09/2010(025354)

RHB Research
Corporate Highlights
Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

N ew s Updat e
13 September 2010
MARKET DATELINE

SP Setia Share Price

Fair Value
:
:
RM4.24
RM4.66
Expanding Setia Indah’s landbank Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (SPSETIA; Code: 8664) Bloomberg: SPSB MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA ROE Gearing GDY
Oct (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009 1,408.4 163.2 16.1 4.3 26.2 - 12.8 2.1 8.5 26.2 2.5
2010f 1,498.5 188.9 18.6 15.7 22.6 19.3 39.8 2.0 9.1 24.0 2.8
2011f 1,621.2 220.4 21.7 16.7 19.4 22.8 37.5 1.9 10.3 28.8 3.2
2012f 1,793.7 247.4 24.3 12.3 17.3 26.2 44.0 1.9 11.1 28.0 3.6
Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC * Consensus Based On IBES Estimates

♦ Buys land in Tebrau JB. SP Setia announced that it has entered into a Issued Capital (m shares) 1,016.8
conditional Sale and Purchase Agreement (SPA) with Kelana Ventures Sdn Market Cap(RMm) 4,311.3
Bhd to purchase a piece of land measuring 259.1 acres in Tebrau, Johor Daily Trading Vol (m shs) 5.2
Bahru, for a purchase consideration of RM169.3m. The company will finance 52wk Price Range (RM) 3.51-4.60
Major Shareholders: (%)
the acquisition through cash and internal funds.
Skim Amanah Saham 20.9
♦ Expanding Setia Indah’s landbank. The total consideration translates into EPF 16.0
a land cost of RM15 psf, which is reasonable in our view. The land is intended Tan Sri Liew 11.1
to replenish SP Setia’s existing (matured) township development - Setia
FYE Oct FY10 FY11 FY12
Indah’s landbank as it is at the tail-end of development (remaining landbank: EPS chg (%) - - 7.2
41 acres; remaining GDV: RM230m). The land is situated in the Tebrau Var to Cons (%) (3.7) (4.9) (7.1)
corridor, which is a fast growing area in Johor given increased development
activities and new property launches as the housing demand has spilt over PE Band Chart
from the congested JB city. Other established projects in the surrounding
area include Taman Mount Austin and Taman Daya. In addition, Taman PER = 23x
Impian Emas, Taman Anggerik and Taman Sri Putra are located along Jalan PER = 20x
PER = 17x
Maju Jaya, which is towards the south-west of the land, while Taman Impian PER = 14x

Jaya is towards the north of the land.

♦ GDV of RM1.5bn over a period of 8 years. The land is expected to yield a

GDV of RM1.5bn and will have a development period of about 8 years, from
end 2011. SP Setia is also seeking approval to exclude the requirement of
Relative Performance To FBM KLCI
low-cost development within the land. The development will comprise mixed
residential and commercial component, targeted to capture the potential
demand from upgraders as well as young adults planning to move out of their
FBM KLCI
parents’ homes but within the vicinity that they accustom to.

♦ Risks and concerns. The risks include: 1) cap on lending rate imposed by Bank
Negara Malaysia; 2) higher tax bracket for real property gain tax (RPGT); 3) SP Setia
delays in launches and approvals; and 4) country risks.

♦ Forecasts. The acquisition of the land is expected to be completed by FY11,

and hence first launch of the development will be in FY12. As such, we raise
our FY12 earnings estimate slightly by 7.2%, while maintaining FY10 and
FY11 forecasts.

♦ Maintain Market Perform. No change in our RNAV estimate (no land

revaluation surplus). Therefore, we maintain our indicative fair value of Loong Kok Wen, CFA
RM4.66, which is inline with our RNAV per share estimate. Maintain Market (603) 92802237
Perform. loong.kok.wen@rhb.com.my

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 Table 2. Earnings Forecasts
FYE Oct (RMm) FY09 FY10F FY11F FY12F

Revenue 1,408.4 1,498.5 1,621.2 1,793.7

Operating profit 185.8 221.4 256.5 279.8
Interest expenses (8.1) (15.5) (15.9) (16.6)
PBT 231.1 258.8 301.9 339.0
Tax (59.9) (69.9) (81.5) (91.5)
Minority interest 0.0 0.0 0.0 0.0
Net profit 163.2 188.9 220.4 247.4
EPS (sen) 16.1 18.6 21.7 24.3
DPS (sen) 10.5 11.6 13.5 15.2

Table 3: RNAV breakdown

Undeveloped Area Area Land cost Mkt value Stake Surplus

landbank Type (acre) (sqf mil) (RM psf) (RM psf) (%) (RM mil)
Central Region
Setia Alam, Shah Alam Mixed township 1,026 44.7 3.5 30 100% 1,184.8
Setia Eco Park, Shah Alam Semi-Ds and bungalows 408 17.8 8.0 40 50% 284.4
Kenny Hills Grande, Kuala Lumpur Bungalows 6 0.3 273.3 360 70% 15.9
Setia City, Shah Alam Commercial 128 5.6 3.5 50 100% 259.3
Setia Nexus 1 & 2, Klang Commercial 10 0.4 55.0 100 70% 13.7

Southern Region
Setia Tropika, Johor Mixed township 238 10.4 7.1 30 100% 237.9
Bukit Indah Johor Mixed township 151 6.6 5.5 30 100% 161.2
Setia Indah Johor Mixed township 41 1.8 2.9 30 100% 48.5
Setia Indah Johor (new land) Mixed township 259.1 11.3 15.0 15 100% 0.0
Setia Eco Gardens, Johor Mixed township 749 32.6 5.5 30 70% 559.5

Northern Region
Setia Pearl Island, Penang 3 storey terrace & semi-d 35 1.5 28.6 100 100% 108.9
Setia View Penang Bungalows 45 2.0 2.9 100 50% 95.1
Sungai Ara Residential 29 1.3 54.0 100 100% 58.1

Others
Aeropod @ Tg Aru, Sabah Commercial 42 1.8 60.4 75 70% 18.7

Total land surplus (net of tax) 2,193.1

NPV @
Project's DCF Stake 10%
(%) (RM mil)
KL Eco City Mixed development 50% 204.8
Sky Residences High rise residential 70% 34.9
Brook Rd Residential 100% 10.1
Setia Vista 3 storey terrace & semi-d 100% 8.7
Eco Lakes My Phuoc Mixed township 55% 75.1
Lai Thieu Land Mixed development 90% 64.7
Hangzhou land Mixed development 55% 18.4
Melbourne CBD Mixed development 100% 118.6

Total DCF 535.2

Total net surplus & DCF 2,728.3

Add: Shareholder's equity (RM
mil) 2,037.2
Warrants conversion 753.3
Total RNAV 5,518.8
No. of outstanding shares (mil) 1,184.8
RNAV per share (RM) 4.66
Target price (RM) - no discount 4.66

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Chart 1: Location of the new piece of land

Source: Company

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IMPORTANT DISCLOSURES

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Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
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Industry/Sector Ratings

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