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Monday, June 30, 2008

SP Setia to ride out tough times

SP Setia Bhd shares have been under pressure since the release of its latest quarterly results on June 24. Traditionally seen as a safe stock for investment, SP Setia's share price has dropped by more than 15% in just a week and it is now at its lowest level in 52 weeks.

The developer’s net profit fell 19.68% to RM47.99mil for the second quarter ended April 30 mainly due to escalating costs of building materials. Revenue, however, was slightly higher at RM301.5mil.

Despite the weak results, some brokerages are still upbeat on SP Setia's prospects.

Citi Investment Research said that despite weaker-than-expected results, SP Setia's management was still confident of meeting the RM1.5bil new property sales target for the current year ending Oct 31 (FY08).

“SP Setia has already achieved RM951mil sales for the first seven months of FY08 and if the company can maintain its sales of RM100mil per month, it should not be a problem to achieve the RM1.5bil sales target,” the research house said in a report.

It added that the only exception was Vietnam, where the company has a current sales target of about US$10mil for FY08.

“We believe the current sell-down is overdone. Previously, despite a lethargic market, SP Setia has been able to consistently chalk up at least RM1bil annual sales,’’ Citi said. “In our opinion, SP Setia is in a league of its own and would be able to withstand a more challenging environment than most of its peers.”

AmResearch has reiterated its “hold” rating on SP Setia with an unchanged target price of RM3.50 based on a 10% discount to its estimated net asset value per share of RM3.89.

In a recent research report, Kim Eng Securities retained a “buy” on the counter, with a target price of RM3.50. It said the stock offered attractive gross dividend yields of around 6% and that SP Setia had a good track record in delivering its promises.

By The Star (by Leong Hung Yee)

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