SP Setia (SPSB) registered 4QFY22 net profit of RM90.3m (-26.8% YoY, +28.7 QoQ) which came in below our expectations but ahead of consensus due to lower than expected billings from its overseas projects. YTD, the Group’s FY22 net profit came in at RM308.1m (+8.4% YoY) which constituted c.87% and 105% of our and consensus full year estimates. The Group’s key revenue contributor i.e. property development achieved revenue of RM4.24bn (+18% YoY) and PBT of RM629.3m (+2.8% YoY) mainly driven by higher sales achieved and contribution from Australia in 4QFY22. The handover of UNO Melbourne (Phase 1) and Sapphire by the Gardens has generated revenue of RM106.2m (out of RM1.1bn unbilled sales) and RM788.5m (out of RM1.2bn unbilled sales) in 4QFY22. All told, we adjust our FY23/24 earnings estimates downwards by 15%/11% to account for lower margins assumed and higher interest costs. Elsewhere, the Group achieved RM4.11bn pre-sales in FY22, exceeding its target by RM110m and set a sales target of RM4.2bn for FY23 (or 5% growth). Unbilled sales as at 4QFY22 stood at RM7.3bn (from RM8.4bn in 3QYF22). Maintain Outperform and TP of RM0.95 pegged at c.60% discount to book value.

• FY22 property revenue at RM4.24bn, or up by +18% YoY mainly driven by higher sales achieved and contributions from its projects in Australia. However, the Group PBT only rose 2.8% YoY due to increase in the cost of development, and also by a hike in the interest rates. In 4QFY22, the Group only managed to bill c.RM900m from its projects in Australia and has remaining RM1.4bn remaining to be recognized in the coming quarters.

• Aims to sell RM4.2bn in FY23. The Group clinched RM4.11bn pre-sales in FY22, exceeding its target by RM110m. Local projects contributed RM3.58bn or c.87% of sales, while international projects contributed RM525m or c.13% of sales. Pre-sales secured were largely from the Central region with RM2.54bn. The Southern region contributed RM615m while the Northern and Eastern regions contributed RM322m. For overseas projects, Battersea Power Station contributed pre-sales of RM424m, while Australia contributed another RM43m. In FY23, the Group has plans to launch new phases of landed properties in its existing township such as Setia Ecohill 2, Setia Mayuri, Setia Tropika, Setia Alamsari, Setia Fontaines, Setia Alam Impian, Bandar Kinrara, Setia Eco Templer, Setia Warisan Tropika and Setia Eco Gardens.

Source: PublicInvest Research - 1 Mar 2023