SP Setia registered 4QFY19 net profit of RM70.1m (-26.8% YoY, -35.6% QoQ) which was within our and consensus expectations. For FY19, the Group’s net profit (excluding 4Q foreign exchange losses of RM29.6m came in at RM373.3m, which constituted c.95% and c.104% of our and consensus full year estimates. The Group saw its new sales spike in 4QFY19 after clinching RM1.49bn sales, with RM675m coming from the Home Ownership Campaign alone. With the encouraging numbers, the Group achieved total yearly sales of RM4.56bn, hitting the RM4.55bn sales target of FY2019 despite a challenging year. Unbilled sales were up marginally to RM10.67bn from RM10.52bn a quarter ago. All told, our FY20-21 earnings estimates are adjusted downwards by -22%/-5% on change in billing and margin assumptions. The Group declared a dividend of 1sen which was lower than expected, which we understand is part of the Group’s strategy in conserving capital to strengthen its balance sheet. Maintain Outperform with fair value of RM2.00 (c.60% discount to RNAV).

• Hits FY19 sales target. The Group achieved total sales of RM4.56bn, slightly higher than the RM4.55bn target set. We understand that local projects contributed RM4.01bn or approximately 88% of the sales whilst the remaining RM543m or c,12% were from international projects such as UNO Melbourne in Australia, Daintree Residence in Singapore and EcoXuan in Vietnam. On the local front, sales were largely from the Central region with RM2.78bn, RM747m from the Southern region and RM480m from the Northern region. Its FY20 sales target is flat at RM4.55bn.

• Planned launches worth RM4.4bn. SP Setia is eyeing to launch RM4.4bn worth of projects in FY20, of which 88% will be from “Township & Eco Themed” developments, 64% of which are landed residential properties. Among the projects include new phases at established township developments of Setia Alam, Setia Ecohill 1 & 2, Setia Alamsari, Bandar Kinrara and Alam Impian in the Central region, Setia Tropika, Taman Pelangi, Taman Pelangi Indah and Taman Rinting in the Southern region and Setia Fontaines in the Northern region. In addition, the Group will also launch commercial products such as shop lots with a GDV of c.RM871m in Alam Impian, Kota Bayuemas, Temasya Glenmarie, Setia Eco Glades and Taman Pelangi. Separately, the Group will also focus on clearing its inventories and has identified six completed projects with c.RM914m unsold stocks or c.64% of inventories.

Source: PublicInvest Research - 27 Feb 2020