SP Setia

A slow quarter for SP Setia 
SP Setia’s 1QFY10 results came in below expectations due  to seasonally slower construction progress in 1QFY10, and lower than expected margin. However, property sales continued to be strong in 1QFY10 at RM608m, which was a record. Another RM152m sales were added in Feb 2010, bringing 4MFY10 sales to RM760m.

Although sentiments remain buoyant, further upside on SP Setia seems limited as a slower than expected margin recovery has dampened our hope of earnings upgrade in the near term.

The only catalyst is likely to come from the launch of KL Eco City which is pending formalisation of privatisation agreement with  DBKL. We downgrade our call from buy to hold, but raise our target price from RM4.05 to RM4.46 by rolling over to FY11 and continue tagging an upper-end P/E valuation of 20x. 
source: ECMLibra