PP 7767/09/2010(025354)

18 June 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su lt s N o te
18 June 2010

SP Setia Share Price : RM4.03

MARKET DATELINE

Fair Value : RM4.66

1HFY10/10 Net Profit Grows 25% YoY Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (SPSETIA; Code: 8664) Bloomberg: SPSB MK

Net Net
FYE Turnover Profit# EPS Growth PER C.EPS* P/NTA P/CF Gearing ROE GDY
Oct (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (x) (%) (%)
2009 1,408.4 163.2 16.1 (12.5) 25.1 - 2.0 10.4 0.3 8.4 3.5
2010f 1,407.7 188.9 18.6 15.7 21.7 20.0 1.9 17.5 0.2 8.8 2.3
2011f 1,532.8 220.4 21.7 16.7 18.6 23.0 1.7 16.1 0.2 9.7 2.7
2012f 1,616.1 230.9 22.7 4.7 17.7 26.0 1.6 15.5 0.2 9.5 2.8
Main Market Listing /Trustee Stock / Syariah-Approved Stock By The SC #Normalised * Consensus Based On IBES

Within expectations. 1HFY10/10 net profit came in at 44-47% of our

RHBRI Vs.
Above
Consensus

full-year forecast and the full-year market consensus. However, we In Line

consider the results within expectations as we expect a stronger Below
2HFY10/10 as the recovery in the property sector gathers momentum.
Issued Capital (m shares) 1016.8
FY10/10 sales target of RM2bn within reach. 1HFY10/10 property Market Cap(RMm) 4,097.7
sales jumped 42% yoy to RM1.21bn. For 7MFY10/10, cumulative property Daily Trading Vol (m shs) 1.4
sales already hit RM1.44bn. This means SP Setia is very much on track to 52wk Price Range (RM) 3.51-4.62
meet its FY10/10 sales target of RM2bn. Major Shareholders: (%)
Tan Seri Liew Kee Sin 12.0
Forecasts. Maintained. PNB 31.0
Capital Group 13.0
Risks and concerns. The risks include: (1) Potential cancellation of EPF 12.0
purchase agreement by buyers; (2) Competition from peers; (3) Delays in
launches and approvals; and (4) Country risks. FYE Oct FY10 FY11 FY12
EPS chg (%) - - -
Maintain Market Perform. We continue to like SP Setia as a proxy to Var to Cons (%) -7 -6 -13
the upturn in the local property market. RNAV-based indicative fair value
PE Band Chart
is RM4.66 (see Table 6).
PER = 23x
PER = 20x
PER = 17x
PER = 14x

Relative Performance To FBM KLCI

FBM KLCI

SP Setia

Please read important disclosures at the end of this report. Joshua CY Ng

(603) 92802151
joshuang@rhb.com.my

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 18 June 2010

Table 2: Earnings Review (YoY Cumulative)

FYE Oct 2009 2010 YoY Observations/Comments
(RMm) 6M 6M Chg
Turnover 649.2 773.0 19%
Property 506.2 666.5 32% Reflective of the recovery in the property market.
Construction 18.4 81.8 >100%
Others 45.8 24.7 (46%)
EBIT 106.3 127.8 20%
Property 80.4 112.2 40% Also helped by slight improvement in margins, we believe, as pressure on
building cost eased.
Construction (1.3) 0.7 nm
Others 13.4 15.0 12%
Net inc/(exp) (3.8) (4.5) 17%
Associates & JVs (0.0) (0.0) (89%)
Pretax profit 102.5 123.4 20%
Taxation (30.8) (34.0) 10%
Minority interest 0.0 0.0 nm
Net profit 71.7 89.4 25% Eroded slightly by a higher effective tax rate.
EPS (sen) 7.1 8.8 25%

EBIT margin 16% 17% 0% pt

Pretax margin 16% 16% 0% pt
Effective tax rate 30% 28% (3% pts)

Table 3: Earnings Review (QoQ)

FYE Oct 2010 2010 QoQ Observations/Comments
(RMm) 1Q 2Q Chg
Turnover 363.9 409.1 12%
Property 315.1 351.3 11% Recovery in the property market gathered momentum.
Construction 38.1 43.7 15%
Others 10.6 14.0 32%
EBIT 54.6 73.2 34%
Property 46.8 65.4 40% Also driven by better margins, we believe, due to higher progress billings
during the quarter from high-margin products.
Construction 0.6 0.1 (84%)
Others 7.3 7.7 6%
Net inc/(exp) (2.3) (2.2) (5%)
Associates & JVs 0.0 (0.0) nm
Pretax profit 52.4 71.0 36%
Taxation (14.2) (19.8) 40%
Minority interest (0.0) 0.0 nm
Net profit 38.2 51.2 34%
EPS (sen) 3.8 5.0 34%

EBIT margin 15% 18% 3% pts We believe due to higher progress billings during the quarter from high-
margin products
Pretax margin 14% 17% 3% pts
Effective tax rate 27% 28% 1% pt

Table 4: Earnings Forecasts Table 5: Discount Rate Assumptions

FYE Oct (RMm) FY09a FY10F FY11F FY12F (%)

Turnover 1,408.4 1,407.7 1,532.8 1,616.1 Risk free rate 4.2

Construction 119.4 50.0 50.0 50.0 Beta 1.0
Property development 1,216.9 1,279.3 1,404.5 1,487.8 Equity risk premium 7.5
Others 72.1 78.3 78.3 78.3 Cost of debt 5.5
Turnover growth (%) 6.0 32.1 8.9 5.4 WACC 10.1
Gross Profit 304.3 169.2 221.8 233.0

EBIT 203.0 163.2 214.1 224.6

Pretax 231.1 251.9 293.9 307.9
Tax (59.9) (63.0) (73.5) (77.0)
Net Profit 163.2 188.9 220.4 230.9
Dividend (sen) 14.0 9.3 10.8 11.4
Source: Company data, RHBRI estimates

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Table 6: RNAV Estimate

Market Book
Area value value Surplus
Assets (acres) RMm RMm RMm
Bukit Indah, Johor 151.0 98.7 39.5 59.2
Setia Indah, Johor 41.0 26.8 5.1 21.7
Setia Tropika, Johor 238.0 155.5 73.1 82.4
Setia Eco Garden, Johor 749.0 489.4 179.4 217.0
Setia Pearl Island, Penang 35.0 152.5 43.6 108.9
Sungai Ara 29.0 126.3 68.2 58.1
Setia Nexus 1 & 2, Klang 10.0 34.8 26.1 8.7
Kenny Hills Grande 6.0 78.4 71.4 4.9
Setia Alam 1,026.0 1,340.8 156.0 1,184.8
Eco Park 408.0 1,421.8 142.2 639.8
Setia City 128.0 167.3 19.5 147.8
Aeropod @ Tg Aru 42.0 164.7 110.5 37.9

DCF
KL Eco City 89.5
Sky Residences 8.6
Brook Rd 3.2
Setia Walk 21.2
Setia Vista 5.2
Eco Lakes 15.6
Lai Thieu Land 16.2
China, Hang Zhou 6.5

Net asset value 2,737.2

Add : Shareholders funds as at 31/10/09 2,037.2
Total net asset value 4,774.4
No. of shares (m) 1,016.8
RNAV per share (RM) 4.70
Proceeds from warrants 753.5
Total NAV 5,527.9
No. of shares (After warrants conversion) 1,185.0
FD RNAV per share (RM) 4.66

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investors individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the RHB Group) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

Connected Persons means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the Connected Persons are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRIs previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the Connected Persons, including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

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 18 June 2010

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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