Internal Weakness

Less exposures in affordable housing and township developments

We expect the demand for affordable homes to remain strong driven by a sizeable

young population. SP Setia seem to less exposure on affordable throughout the year. This

is very important SP Setia to launch their housing development project more instead

township developments as the election period coming and government might present

more affordable housing program to meet the market demand. Penang and Selangor state

government are strongly encouraging these housing projects could be done.

But unfortunately, the less exposures in affordable housing becomes one of the

weakness for the company. Besides that, the failure project happened in Tanjung Bungah,

Penang leads township development more suffer from their business.

 Wrong Investment

 SP Setia Bhd hopes to take advantage of lower prices in Vietnam's property

market by starting a development in downtown Ho Chi Minh City or Hanoi

SP Setia's first two projects in Vietnam are housing developments in Binh Duong

province, adjacent to Ho Chi Minh City, the country's business centre. The developer is

now looking for a “high-rise building with some branding” to boost its corporate image in

Vietnam.

Vietnam's property prices were falling amid a glut of high-end residential

apartment developments, UK-listed Vietnam Property Fund Ltd said last month.

Sales in the country had been slow, hurt by commercial bank lending rates of “about

18% or 19%,Vietnamese central bank pushed up its policy rates to slow Asia's fastest

inflation.

Weak Cost Structure

A weak cost structure means  for S P Setia’s costs are high in comparison to their

competitor. Revenue increased 25.6% and also higher than preceding year corresponding

quarter 24.2%, eps increased 21.8% but lower than preceding year corresponding quarter

8.7%, cash generated from operating not enough to cover financing payments hence

generated more cash from financing and spent 17.9% of Group cash to cover all other

expenses, high margin and keep increasing, lower liquidity ratio and was indicate

weakest financial strength among recent year, higher gearing ratio and was indicate

weaker financial leverage, longer inventory turnover period but offset by higher revenue,

higher property development cost can indicate got more property development project

Decline in Construction Business

Revenue and earnings of construction segment declined by 37% and 23% respectively in

9MFY12 mainly due to completion of the KDN construction contract in Setia Tropika,

Johor Bahru. Nevertheless, construction earnings contribution is negligible. The

company said its construction business suffered a slump. Quarterly revenues were down

3 percent to RM29 million and pre-tax profit slumped a hefty 90 percent as it worked

under concession on build, operate and transfer public works for Penang and Sabah state

governments. These works were done in exchange for yet unrealised benefits such as

development rights in Penang and land exchange in Sabah.

Bad Acquisition

Bad acquisition can hurt SWOT Analysis for S P Setia by increasing their costs and

reducing the value of their combined businesses. Acquisitions can also distract from the

core business and merge cultures that don’t complement each other. The country’s

second largest property firm by market capitalization, is the latest to be swept off the

private property sector with the takeover offer by its parent Permodalan Nasional

Berhad(PNB). Research analysts are divided on whether investors should cash out on

Permodalan Nasional Bhd’s (PNB) offer to acquire property developer SP Setia Bhd’s

shares at RM3.90 per share and 91 sen per warrant.

The unstable condition by the investor due to the acquisition with PNB strongly volatile

the share price in the market. From RM4.17 drops to RM3.87 within this suffer period.