KEY INVESTMENT HIGHLIGHTS

• FY19 earnings within expectations

• Higher earnings in FY19

• FY19 new sales at RM4.56b

• Earnings estimate maintained

• Maintain BUY with an unchanged TP of RM1.86

FY19 earnings within expectations. S P Setia FY19 core net income of RM306.8m came in within expectations, meeting 101% and 97% of our and consensus full year estimates respectively. Note that we have excluded mainly disposal gains on former British Embassy Land and forex loss in our core net income calculations. Dividend of 1sen per share was announced.

Higher earnings in FY19. S P Setia recorded higher core net income of RM88.3m (+68.9%yoy) in 4QFY19, bringing full year core net income to RM306.8m (+33.4%yoy) which is in line with higher topline. Higher earnings in FY19 were underpinned by earnings recognition from ongoing projects and sales of completed units. Besides, lower administrative and general expenses (-20%yoy) has also helped in earnings growth. Meanwhile, unbilled sales increased marginally to RM10.67b in 4QFY19 from RM10.52b in 3QFY19, providing close to 3 years earnings visibility.

FY19 new sales at RM4.56b. S P Setia recorded decent property sales of RM1.49b in 4QFY19 comparing to new sales of RM1.09b in 3QFY19. That brought total new sales to RM4.56b, in line with management new sales target of RM4.55b. Notably, 40% of new property sales form local projects were derived from the Home Ownership Campaign (HOC). Meanwhile, S P Setia set new sales target at RM4.55b for FY20 as it will continue to concentrate on launching landed residential products in Malaysia.

Maintain BUY with an unchanged TP of RM1.86. We maintain our earnings forecast for FY20F and introduce earnings forecast for FY21F. Out TP is also maintained at RM1.86, based on 58% discount to RNAV. We maintain Buy call on S P Setia as its valuation is attractive, trading at 64% discount to NTA of RM3.55 per share.

Source: MIDF Research - 27 Feb 2020