Strong Sell!!!

Take Profit on Risky Valuation

Downgrade
Price RM3.50


Target RM3.14

Although the stock managed to nearly hit our target price of RM3.14 in late ‘08, some window-dressing activities since early ’09 have pushed its price up, thus valuing it at a significant premium vis-à-vis all its peers. On a historical perspective, its current valuation of 1.7x P/NTA is similar to the pricing during the very early phase of the 2007/08 upcycle, implying that the market might have been too gung-ho in valuing the stock in recent weeks amid the sector’s anticipated downcycle in 2009/10. Such valuation appears unsustainable and given the projected dividend yield of only 5%, any further upside potential, if any, may not sufficiently cover the substantial downside risk from the current level. Investors should consider Taking Profit on the stock and accumulate at well below the RM3.00 level.

Risky valuation. Its current valuation of 1.7x P/NTA appears risky on at least two fronts:
• SPSB is currently valued by the market at a substantial premium to its peers, which are merely going at an average of 0.7x P/NTA. Even Mah Sing (Neutral, TP: RM1.22) is only trading at 1.3x P/NTA (see Figure 1); and

• From a historical perspective, the stock’s current valuation is similar to the market pricing during the early phase of the 2007/08 upcycle. Given the sector’s anticipated downcycle in 2009/10, we see no strong justification for this significant “premium” on the stock’s current price. Downgrade to Take Profit (from Neutral). Since SPSB’s risk-return profile appears unfavourable at the current level, investors should consider Taking Profit on the stock and accumulate at well below the RM3.00 level. We made no changes to our earnings projections and our target price of RM3.14 implies an FY09 P/NTA of 1.5x, which approximately coincides with its P/NTA historical mean since year 1999.


But we still love the business. In our Nov 6, ‘08 sector report, we demonstrated that Malaysian higher-end landed properties in some well-established areas, the segment that SPSB is well anchored in, may potentially outperform the sector in the impending downcycle in 2009/10. Although unable to offer much significant earnings upside for now, the risk of a severe downside to earnings will nonetheless be much less vis-à-vis those with substantial exposure in the luxury condos segment, the sub-segment which is likely to see a very tough time in 2009/10. Given its low net gearing of 0.19x, SPSB stands a very good chance of riding out the impending storm.


SP Setia is one of the largest property developers in Malaysia with prime exposure in the Klang Valley, Johor and Penang. Its Vietnam project has yet to kick off in a significant way, however.

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Is that mean that the price might come down to 3.14 around that and it might stay around there .



i see the price now are 3.54 now is the same as opening .

,

and ya if a strong sell are advise that mean sell rite....... hehehhhe .....noob quest . the answer is yes rite ..........

This post has been edited by whoknowz: Jan 18 2009, 12:37 AM

this is just the analyst comment

sometimes they're right, sometimes not...depend on ur judgement...

but sometimes they call for sell, is time to buy..haha

SP Setia’s latest 5/95 Home Loan package

URL: http://biz.thestar.com.my/news/story.asp?f...12&sec=business