24 April 2012
SP Setia Qinzhou Industrial Park (QIP) could potentially worth RM 20 bil.- RHB Research
(SPSETIA opening stock price today (24.4.2012) was RM 3.84)
RHB Research Institute said it was positive on S P Setia's venture into China and raised the fair value to RM4.
It said on Tuesday the government-to-government tie-up underpinned S P Setia's venture in the Qinzhou Industrial Park (QIP) development and it should enhance the credibility and chances of success of the project.
Other positive factors, it said were that using a Tier-4 city as an entry point could avoid the high regulatory requirements in housing sales while this was also a timely entry to the Chinese market in the temporary sector downcycle.
RHB Research said the QIP project could be potentially worth more than RM20bil. If the first phase was proven successful, long-term value to S P Setia would be tremendous.
“The risk profile of the company is expected to change given the size of the QIP project (13,591 acres). We are biased on the positive side due to the above factors. Initial funding and future working capital will be funded via debt and equity, which will be within S P Setia's capacity given its current net gearing of 8%,” it said.
The research house said the fair value was raised to RM4.00 as it imputed only the discounted cashflow value from the Binhai project.
“Given minimal potential upside, we maintain our Market Perform call on the stock,” it said.