The US labour market showed signs of a steady slowdown in October, with job openings increasing moderately and layoffs declining, according to the latest Job Openings and Labor Turnover Survey (JOLTS) report released by the Bureau of Labor Statistics on Tuesday. Job openings, a key indicator of labour demand, rose by 372,000 to 7.744 million at the end of October. However, the September figures were revised downward to 7.372 million from the initially reported 7.443 million. Economists polled by Reuters had anticipated 7.475 million vacancies. Labour Market Dynamics While job openings increased, hires dropped by 269,000 to 5.313 million, and layoffs fell by 169,000 to 1.633 million. These figures suggest a gradual cooling of the labour market rather than a sharp contraction. Hurricanes and strikes also impacted October’s labour market data. Rebuilding efforts in storm-affected regions and the resolution of strikes at Boeing and another aerospace company are expected to contribute to a ...
Retain BUY call with a target price (TP) of RM4.03
INVESTMENT HIGHLIGHTS
- Acquiring land in Singapore for SGD265m
- Positive on both of the news
- Earnings estimate unchanged
- Maintain BUY with higher TP of RM4.03
Acquiring land in Singapore for SGD265m. SP Setia Berhad (SPSETIA) had won a tender for a 4.6 acres land along Toh Tuck Road, Singapore for SGD265.0m (or RM847.6m). We gather that SPSETIA plans to develop a 5-storey condominium with 327 units on the 99-year leasehold land with GDV of SGD457.0m (or RM1.46b). Fundings can be from combination of internally generated funds and borrowings. Target property launch is in 2018 with expected completion period of 5 years.
Details of the land. The Land is located near the vicinity of Bukit Timah region and it is accessible to Pan Island Expressway (PIE), the Bukit Timah Expressway (BKE) and Ayer Rajah Expressway (AYE). It is also close to the Beauty World MRT station (~650m away). Nearby amenities include international schools, tertiary education centres, parks and shopping malls.
Positive on the news. SP SETIA has good experience in property development in Singapore as their previous two projects in Singapore (18 Woodsville and Eco Sanctuary) have received good take up rate. We estimated that the land purchase in Singapore is RNAV accretive with earnings contribution to come in from FY19 onwards.
Earnings estimate unchanged. As the project launch is in 2018, we believe that any earnings contribution will only come in from FY19 onwards. Hence, we maintain our FY17 and FY18 earnings estimate at RM724m and RM751m respectively.
Maintain BUY with TP of RM4.03. Our Target Price has been increased to RM4.03 (from RM4.00) as we have added in Toh Tuck Road Land into our RNAV. Valuation methodology is unchanged by using 10% discount to RNAV. We like SPSETIA due to: i) our belief that it will gain FBMKLCI status in 3 years time, ii) positive newsflow surrounding the I&P deal and iii) good dividend yield of 5.0%.
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