Thursday, January 27, 2011

OSK Research maintains Buy on SP Setia, TP RM7.23

KUALA LUMPUR: OSK Research said consistent with the general weakness in the stock market of late, SP Setia has been under heavy selling pressure, having fallen 10.7% from the peak of RM6.93 in two weeks.

The research house said on Thursday, Jan 27 as a result, SPSETIA-WB is now trading at a discount of 14 sen relative to its mother share, SP Setia.

'Hence, we believe there could be an arbitrage opportunity for the current shareholders of SP Setia. As an illustration, assuming that an existing shareholder now takes profit on the shares of SP Setia at a price of RM6.26, buys SPSETIA-WB at RM1.64 and then exercises the warrants at a conversion price of RM4.48, he/she will pocket a gross 14 sen, or 2.3% arbitrage gain.

'That notwithstanding, we maintain our BUY call on SP Setia with a price target of RM7.23 (cum), based on 3.1x CY11 P/NTA, the peak valuation it achieved in 2007,' it said.


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