SELPROP ... Dec09

Results Review & Earnings Outlook
 Selprop’s FY09 (Oct.) results were above our expectations with a
strong showing in the final quarter that pushed its net profit to
MYR32.3 mln for FY09 from a net loss of MYR3.2 mln for 9MFY09.
The variance was due mainly to higher-than-expected contributions
from property development, which jumped 154% QoQ to MYR27.5
mln in 4QFY09 from MYR10.8 mln in 3QFY09. Selprop reported a 9%
YoY rise in net profit to MYR35.8 mln in 4QFY09 from MYR32.9 mln in
4QFY08 (+7.5% QoQ from 3QFY09’s MYR33.3 mln).

 The strong property development profit came mainly from its two
property projects, Bukit Permata and Selayang Mulia, which are
located in Batu Caves and Selayang, respectively and also a 50%-
owned shopping mall/apartment project in Perth, Australia. Selprop
also benefits from the turnaround in the exchange rate of Australia
dollar (AUD) and its overseas investments in 3QFY09 onwards.

 With demand for properties still strong, especially high-end properties,
Selprop is likely to launch its major development project in Damansara
Heights, a 107-unit high-end condominium project (Gross
Development Value (GDV): MYR240 mln in 2010.

 Due to the turnaround in the exchange rate of the AUD and also
higher property development profit for both local and Australian
property projects, we revised our forecasts FY10 net profit upwards by
28.6% and introduce FY11 net profit.

Recommendation & Investment Risks
 We maintain both our Buy call and 12-month target price of MYR3.90.
Our target price is based on a 20% (unchanged) discount to NTA and
includes projected net DPS. Our target 0.8x P/NTA multiple is
consistent with our normal valuation metrics (0.5x-0.8x P/NTA) for
small- and mid-cap property companies.

 We expect Selprop’s share price to be well supported by the market
value of Selprop’s assets, especially its landbanks and buildings in
Damansara Heights.

 The main risks to our recommendations and target price are: (i) a
drastic and prolonged slowdown in property demand in Malaysia; (ii)
an unexpected rise in interest rates, which would depress house
buyers’ sentiment; (iii) a delay in the launch of its projects in
Damansara Heights; and (iv) lower-than-expected rental income and
gains from sales of investments.