SP Setia earnings to improve

The developer is on track to hit its sales target of RM3.8b with 76% of the amount achieved as at October 2020


SP SETIA Bhd is set to see improved earnings once the Covid- 19 pandemic headwinds subside, but will likely continue to see a flattish sales target for the year.

Hong Leong Investment Bank (HLIB) Research stated in a note yesterday the property and infrastructure company is on track to hit its sales target of RM3.8 billion with 76% of the amount achieved as at October 2020, with a booking pipeline of RM1.7 billion.

SP Setia chalked in RM2.3 billion worth of sales for the first nine months of 2020 and management said its total sales as at October 2020 stood at RM2.9 billion.

“Management shared that in the last five years, pipeline bookings hovered around RM700 million but this has recently risen to RM1.7 billion with an estimated conversion rate of 50%,” HLIB Research said.

SP Setia has plans to launch projects up to RM3.7 billion in gross development value for the financial year 2021 (FY21) compared to RM2.8 billion in FY20, with 94% worth will be in Malaysia.

The new projects will mostly be located in the central region such as Setia Alam, Setia Ecohill, Setia Eco-park, Bandar Kinrara and Alam Impian. The developer’s inventory has dropped to RM1 billion as of September 2020 due to Movement Control Order (MCO) in place.

“The group held back some launches to focus on selling its completed units. SP Setia is targeting to clear inventory levels by 10% to 15% annually, and during FY20, management shared that a 10% to 15% dis- count was given to expedite sales and help clear inventory,” it said.

MCO 2.0 has seen all its sales galleries closed but management has managed to cushion the impact through its online platform.

“Setia Virtual X allows online bookings and queries for the property sector, while its construction arm will continue as per usual as it has received permission from the Ministry of International Trade and Industry. Hence, progress billings will continue during MCO, albeit potentially at a slower pace given tight standard operating procedures,” the report noted.

Its other projects have picked up momentum notably the Sapphire and Uno project in Melbourne, Australia.

“This project has achieved more than 90% in take-up rate and is on track to be completed in time.”

“In Singapore, the Daintree project saw pent up demand and an increase in sales, with management sharing that the take-up rate has increased to 90% by the end of December 2020,” HLIB Research added.

In line with that, the investment bank has maintained its ‘Hold’ call on the developer with an unchanged target price of RM1.

It added that while the broader property market remains soft, it is hopeful FY20 will be a bottom year and SP Setia FY21 and FY22 will be supported by the