Stock Name: SPSETIA
Company Name: SP SETIA BHD
Research House: MAYBANK
S P Setia Bhd
(March 3, RM6)
Maintain buy at RM5.96 with target price of RM7.15: We are positive on the latest Cyberjaya land purchase by S P Setia given its fair pricing. More importantly, the land ' which will be developed into a mixed development with a gross development value (GDV) of RM3 billion ' will enhance our FY13 earnings forecast by 3%. S P Setia remains our top 'buy' in property with an unchanged target price (TP) of RM7.15 (10% premium to its RM6.50 realisable net asset value [RNAV]).
S P Setia has proposed the purchase a 268.1-acre (107.24ha) tract of freehold land in Cyberjaya for RM420.4 million (RM36 psf) from Cyberview Sdn Bhd and Setia Haruman Sdn Bhd. Cyberview, a subsidiary of the Minister of Finance, Inc, is the landowner, while Setia Haruman is the master developer of the Cyberjaya Flagship Zone area. The project will be developed via a 70:30 joint venture between S P Setia and Setia Haruman.
The land is strategically located within the Cyberjaya Flagship Zone and is highly accessible and well-connected by highways, including the North-South Expressway, Damansara-Puchong Expressway and the Maju Expressway. We consider the RM36 psf land cost to be fair given the RM24 to RM36 psf transacted prices in that area (for example, Mah Sing's Garden Residence extension at RM34 psf cost and Paramount's RM36 psf).
We understand that the land will be developed into a mid- to high-end gated and guarded mixed development with a similar 'Eco' concept to S P Setia's highly successful Setia Eco Park (RM3.5 billion remaining gross development value [GDV]; 17% of 2010 sales).
GDV is estimated at RM3 billion which would lift S P Setia's remaining development GDV to RM49 billion (+6.5%). From our ground check, we understand that the land has natural waterways which S P Setia can ride on for eco-theme purposes.
We conservatively expect a 25% pretax margin ( against Setia Alam's 25% and Setia Eco Park's 30%). Assuming a six-year development period and a full-year impact in FY13, we raise our FY13 earnings by 3%. Our RM6.50 RNAV is unchanged for now ('zero' land surplus).
The 10% premium to RNAV to derive our TP is also supported by S P Setia's strong 38% 3-year forward earnings per share compound annual growth rate potential, superior management team and its market leader position in the property industry. ' Maybank IB Research, March 3
This article appeared in The Edge Financial Daily, March 4, 2011.
Company Name: SP SETIA BHD
Research House: MAYBANK
S P Setia Bhd
(March 3, RM6)
Maintain buy at RM5.96 with target price of RM7.15: We are positive on the latest Cyberjaya land purchase by S P Setia given its fair pricing. More importantly, the land ' which will be developed into a mixed development with a gross development value (GDV) of RM3 billion ' will enhance our FY13 earnings forecast by 3%. S P Setia remains our top 'buy' in property with an unchanged target price (TP) of RM7.15 (10% premium to its RM6.50 realisable net asset value [RNAV]).
S P Setia has proposed the purchase a 268.1-acre (107.24ha) tract of freehold land in Cyberjaya for RM420.4 million (RM36 psf) from Cyberview Sdn Bhd and Setia Haruman Sdn Bhd. Cyberview, a subsidiary of the Minister of Finance, Inc, is the landowner, while Setia Haruman is the master developer of the Cyberjaya Flagship Zone area. The project will be developed via a 70:30 joint venture between S P Setia and Setia Haruman.
The land is strategically located within the Cyberjaya Flagship Zone and is highly accessible and well-connected by highways, including the North-South Expressway, Damansara-Puchong Expressway and the Maju Expressway. We consider the RM36 psf land cost to be fair given the RM24 to RM36 psf transacted prices in that area (for example, Mah Sing's Garden Residence extension at RM34 psf cost and Paramount's RM36 psf).
We understand that the land will be developed into a mid- to high-end gated and guarded mixed development with a similar 'Eco' concept to S P Setia's highly successful Setia Eco Park (RM3.5 billion remaining gross development value [GDV]; 17% of 2010 sales).
GDV is estimated at RM3 billion which would lift S P Setia's remaining development GDV to RM49 billion (+6.5%). From our ground check, we understand that the land has natural waterways which S P Setia can ride on for eco-theme purposes.
We conservatively expect a 25% pretax margin ( against Setia Alam's 25% and Setia Eco Park's 30%). Assuming a six-year development period and a full-year impact in FY13, we raise our FY13 earnings by 3%. Our RM6.50 RNAV is unchanged for now ('zero' land surplus).
The 10% premium to RNAV to derive our TP is also supported by S P Setia's strong 38% 3-year forward earnings per share compound annual growth rate potential, superior management team and its market leader position in the property industry. ' Maybank IB Research, March 3
This article appeared in The Edge Financial Daily, March 4, 2011.
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