KUALA LUMPUR: Shares of S P Setia Bhd (fundamental: 1.4; valuation: 1.2) yesterday rose 2.54% or 9 sen to RM3.64 as analysts project that the company will likely withstand downside risks to earnings and share price amid a challenging market this year.
At market close yesterday, the company saw 2.77 million of its shares traded. The stock reached an intra-day high of RM3.65 before easing to close at RM3.64, with a market capitalisation of RM9.24 billion.
Analysts have projected that the property sector is expected to face a challenging market this year, as hopes of a pre-goods and services tax (GST) demand rally have been quashed by buyers’ wait-and-see attitude and tighter lending liquidity, which will unlikely abate in the first quarter of 2015.
Maybank Investment Bank Bhd, in a note, said it sees the overplayed pre-GST theme, developers turning cautious, rising pressure on margins post-GST, and waning price catalysts as factors that could limit upside for the property sector in 2015.
However, it has maintained its “buy” rating on S P Setia, with a target price (TP) of RM4.07.
“While there is still concern over S P Setia’s management succession plan, downside risks to earnings and share price are limited,. Catalysts include potential asset injection by its major shareholders,” the note read.
It was reported that S P Setia was left with a vacuum in leadership after the departure of its former president and chief executive officer Tan Sri Liew Kee Sin on April 30, 2014.
S P Setia’s then chief financial officer Datuk Teow Leong Seng as well as deputy president and chief operating officer Datuk Voon Tin Yow were supposed to helm the company into 2015, but both left last year.
Liew is currently a non-executive director of Bursa Malaysia-listed Eco World Development Group Bhd.
Meanwhile, Kenanga Research Sdn Bhd observed that the property cooling measures announced in Budget 2014 had stymied increases in property prices.
Kenanga has also trimmed its TPs on property stocks in view of earnings and sales downgrades.
It noted that developers are likely to see flat to declining sales over 2015 and even affordable players will not be spared, meaning there is another one to two more quarters of earnings downgrades by consensus.
Nevertheless, its top pick is S P Setia, which it upgraded to “outperfrom” from “market perform” previously, premised on potential mergers and acquisitions news and bullet recognitions from its overseas projects.
It also increased S P Setia’s TP by 20% to RM3.95 from RM3.28.
The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.
This article first appeared in The Edge Financial Daily, on January 21, 2015.