KUALA LUMPUR: CIMB Equities Research believes SP Setia will be able to achieve its FY17 sales target of RM4bil in FY17 as the group plans to launch projects with a combined gross development value (GDV) of RM2bil in the fourth quarter.It said on Friday the notable launches are in Setia Alam, Setia Ecohill, Setia Eco Templer and KL Eco City.“Given the prevailing market sentiment, SP Setia is strategically repositioning the launch of its condominium projects and bringing forward the launches of more mid-priced landed properties. This is a good move, in our opinion,” it said.CIMB Research views the acquisition of I&P as an overall long-term positive as it would make SP Setia Malaysia's 3rd largest developer by land bank size.However, the medium-term concern is the potential dilution to its earnings arising from the issuance of up to RM1.2bil rights shares and the RM1.2bil share placement.“In our previous report on the I&P acquisition, we highlighted potential downside risk of up to 33% to FY18F EPS, including the estimated dilutive impact from the enlarged share base,” it said.CIMB Research said while it likes the long-term prospects of the I&P acquisition, this is offset by the downside risk to FY18F EPS, due mainly to the massive cash calls.“SP Setia remains a Hold with stronger-than-expected sales as the key upside risk while high integration cost is the key downside risk.“We retain our target price of RM3.40, based on a 30% discount to RNAV,” it said.The research house, commenting on the results, said excluding forex losses, SP Setia’s 9M17 core net profit rose 46% on-year.Meanwhile, the reported earnings in 9M17 excluded the accrued dividend payable to the holders of preference shares, which were issued in December 2016.“We derive at a 9M17 core net profit of RM462mil after deducting the estimated dividend payment of about RM55mil accrued year-to-date,” it added.CIMB Research said the 9M17 core earnings came in stronger year-on-year, supported by the substantial staggered completion of Phase 1 of Battersea Power Station, London.This offset the impact of lower revenue (-19% year-on-year) due to the transitional effect of projects completion and handover in the same period last year, and of many ongoing projects still at an early stage of construction.The entire Battersea project Phase 1, comprising 12 blocks (865 units), was completed in Oct 2017.SP Setia achieved RM2.8bil sales in 9M17, which accounted for 70% of its total full-year target sales of RM4bil. Its overseas projects were the star performer, accounting for over 41% of 9M17 sales.This was mainly driven by Sapphire by the Gardens luxury residential apartments in Melbourne which raked up a strong take-up rate of 83% in less than four months.SP Setia's total unbilled sales stood at RM7.1bil at end-Sep 2017, translating into 1.4 times FY16 revenue.

Source: The Star November 10, 2017 00:22 UTC