SP Setia registered 2QFY20 net loss of RM141.5m (-224% YoY, -597% QoQ), due mainly to mandatory site closures as a result of the Movement Control Order (MCO), and also one-off impairment of RM145.9m on completed inventories. Excluding the one-off impairment, we estimate the Group’s YTD net profit at RM33m (or 13% and 18% or our and consensus full year estimates) which is still below full-year estimates. The Group’s sales in 2QFY20 was lower at RM405m, bringing total sales achieved so far to c.RM875m. We understand that the Group managed to offload inventories worth RM179m during the quarter. In addition, the Group had also secured bookings of RM1.42bn as at July 2020 and maintains it FY20 sales target of RM3.8bn. We revise our FY20 earnings downwards by 52% after accounting for the inventories write-down, while also making billing changes. All told, the Group still expects the trading environment to remain challenging near term. We maintain our Neutral call with fair value of RM0.95 (c.75% discount to RNAV).

• Sold RM405m in 2QFY20. In 1HFY20, SP Setia secured sales of RM875m contributed mainly by local projects (RM702m or 80% of total sales). The remaining RM173m or c.20% was contributed largely by international projects such as UNO Melbourne, Sapphire by the Gardens and Marque Residences in Australia as well as Daintree Residence in Singapore. Local sales were mainly driven by the Central region with RM502m while RM127m was from the Southern region. The Northern region contributed another RM73m. We understand that sales achieved as at August 2020 is RM1.45bn

• Unbilled sales steady at RM9.68bn. The Group has c.RM9.68bn unbilled sales as at 2QFY20, down slightly from RM9.8bn in 1QFY20, which ensures revenue visibility for the next two years. We believe that, albeit construction works at Battersea Power Station (BPS) having been halted or moving at a slower pace in its other overseas projects, the Group is still targeting to complete BPS phase 2 and 3A by 2021 and projects in Melbourne by 2022.

Source: PublicInvest Research - 14 Aug 2020