RHB Research raises SP Setia target price to RM3.88, keeps earnings forecast unchanged

-A +A

KUALA LUMPUR (March 9): RHB Research Institute Sdn Bhd has maintained its "Buy" rating on SP Setia Bhd at RM3.16, with a higher target price of RM3.88 (from RM3.85) and said it does not expect the developer to kick-start its project into Setia Federal Hill, due to the current slow property market.

This comes at the back of an announcement by SP Setia that it acquired the remaining 50% stake in Setia Federal Hill yesterday. 

In a note today, RHB's Loong Kok Wen kept his earnings forecast for SP Setia unchanged. 

SP Setia has also raised its estimated gross development value (GDV) for the project to RM20.19 billion (from RM14.3 billion) over a development period of 15 years. The project comprises residential and commercial components, as well as a retail mall. 

“We are positive on this transaction, as the company would be able to take full control of this mega-development. However, given the higher GDV and effective stake, our target price is raised to RM3.88 (from RM3.85, 23% upside), due to the incremental value to our revalued net asset valuation (RNAV) estimate. This is based on an unchanged 30% discount to RNAV. We maintain our Buy recommendation on this counter,” Loong said. 

To recap, the Setia Federal Hill project came about when SP Setia and Mekar (50:50) obtained the land via a privatisation agreement in November 2012, which involved a land-swap deal. Under the agreement, the two parties needed to construct a new National Institute of Health (1NIH) Complex, together with 24 units of apartments and a clinic, on a 41.5-acre site at Setia Alam. 

At 11.05am, SP Setia rose 0.32% or 1 sen to RM3.17, with 76,200 shares done.