SP Setia’s 4QFY20 net profit came in at RM55.5m (-24.0% YoY, -121.1% QoQ) which was within our expectation though below consensus. Excluding the impairments of completed inventories and work-in-progress development in Battersea Power Station (BPS) during the quarter, the estimated YTD net loss is at RM221.9m which is almost on par with our estimates. The Group surpassed its FY20 sales target of RM3.80bn slightly, reporting RM3.82bn in sales secured during the year. FY20 net profit was largely dragged by provisions for the impairment of the work in progress and inventories under construction of £62.4m (RM336.3m) arising from the Group’s 40%-owned joint venture company in BPS. The Group is expecting flattish sales of RM3.8bn in FY21 given current headwinds. Unbilled sales as at end-Dec 2020 was higher at RM10.05bn (from RM9.8bn in 3QFY20). We cut FY21/22 by 17%/16% respectively however after imputing lower margins and billings assumptions, with some billings from BPS phase 2&3A now expected to be staggered between March FY21 to March FY22. Maintain Neutral call with fair value of RM0.95 (c.75% discount to RNAV).

• Surpassing FY20 sales target. Group pre-sales for FY20 was RM3.82bn, surpassing its revised FY20 sales target of RM3.8bn. Local projects contributed RM3.11bn or c.81% of the sales with remaining RM716m or c.19% from overseas projects. On the local front, sales were mainly from the Central region with RM2.28bn, while Southern and Northern contributed RM415m and RM312m respectively. Due to the pandemic restrictions, SP Setia is focusing more on digital marketing via various platforms which among others include Setia Virtual-X Road Show and on line live balloting. Separately, the Group has also identified 9 tracts of land measuring 1,295 acres with estimated market value of RM1.96bn for outright sale or working with other parties on joint-venture basis.

• Eyeing another RM3.8bn in FY21. FY21 sales target is flattish at RM3.8bn, with 85% expected from local projects while the remainder will come from overseas projects. Planned launches are estimated to be around RM3.68bn with RM2.6bn expected from the Central region alone. 54% of the products are expected to be priced below RM1m of which 67% will be landed properties. Currently, the group has 48 on-going projects and effective remaining land banks of 8,528 acres with a GDV of RM136.87bn as at 31 December 2020.

Source: PublicInvest Research - 26 Feb 2021