KUALA LUMPUR: ECM Libra Research is maintaining its Hold call on SP Setia Bhd and a Target Price of RM4.46 based on the upper-end P/E valuation of 20x on CY11 earnings.

It said on Tuesday, March 30 while it is positive of SP Setia’s acquisition of a 1.07-acre land in Melbourne for A$30 million (RM92.4 million) via a tender process, it is also wary of the risk involved.

The land acquired is located on the central spine of the Melbourne’s Central Business District within the northern precinct, between A’Beckett Street and Franklin Street, and between Elizabeth and Queen Streets.

The acquisition is conditional upon the approval of Australia’s Foreign Investment Review Board being obtained by SP Setia by May 3, 2010.

ECM Libra Research, explaining its concern, said median house price in Melbourne has rose by a staggering 19.7% in 2009 on the back of strong employment and migration.

However, Australian authorities are reportedly growing uneasy with the pace of price increase which may lead to asset bubble, thereby raising prospect of further interest rate hike by the Reserve Bank of Australia.

Building regulations which are strict but transparent means that there will be less risk in procuring building plan approval though it will take awhile to meet these stringent requirements.

“As such, we are not surprised by management’s guidance of 18-24 months before the project can be launched.

“We leave our estimates unchanged for now until more development details are revealed by the management in due course. We also maintain our hold call and target price of RM4.46 based on upper-end P/E valuation of 20x on CY11 earnings,” said ECM Libra Research.