The shares slid 3.7 per cent to RM4.22 at 12:30pm break, set for the lowest level since June 9. The stock is the worst performer on the benchmark Kuala Lumpur Composite Index today.
The shares, which have surged 36 per cent this year, outpacing the benchmark index’s 21 per cent advance, have taken into account the outlook for earnings and the prospects for a liberalisation in government policies that may benefit the property industry, JPMorgan said in a report today.
“The good news has been priced in,” Simone Yeoh, an analyst at JPMorgan, said in the report. The shares have outperformed and trade at 25 times 2010 expected earnings, she said.
SP Setia’s price-to-earnings multiple is double the average of 13 times among Malaysian property stocks in Malaysia, according to data compiled by Bloomberg. Yeoh cut her rating on the company to “underweight” from “neutral” and lowered the target price to RM3.60 from RM3.80.
SP Setia in April led a rally among Malaysian property developers that made them the country’s best performers for that month, after central bank data showed loans approved for home purchases in March jumped the most in at least a year.
Luring Investors
SP Setia’s profit in the three months ended April 30 dropped to RM40.5 million because of lower profit margins as the cost of building materials rose.
While the company’s sales momentum has picked up, “aggressive” incentives are putting profit margins under pressure, according to the JPMorgan report.
SP Setia raked in RM803 million of sales as at June 15, as the company, in its property campaign, absorbed buyers’ stamp duties, legal fees and interest costs during the construction period.
The company is boosting sales by “sacrificing margins,” Ong Chee Ting, an analyst at Maybank Investment Bank Bhd, said in a report today. The shares are “way too expensive,” he said.
By Bloomberg
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