SP Setia outlook remains stable

Maintaining a ‘buy’ call on the stock, AmInvestment Bank Bhd (AmInvestment) expects SP Setia Bhd’s (SP Setia) outlook to remain stable, on the back of “its strong unbilled sales of RM10.95 billion and overseas contribution beginning 2020”. 

SP Setia believed that demand for owner-occupied landed homes within established township remained strong, despite Malaysia’ lacklustre property market, noted AmInvestment’s research team, reported the Borneo Post.

“The company’s most recent launches, Setia Safiro Phase A1 and Setia Mayuri Phase One were sold out during their launches in July 2019,” it said.

“Meanwhile, the launch of Clarino double-storey terrace houses priced from RM649,000 in the mature township of Alam Impian in March 2019 achieved a strong take-up rate of 98 percent within a month.”

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With a sales target of RM5.65 million for FY2019, SP Setia intends to launch projects with gross development value (GDV) of around RM6.8 billion, with focus in Johor and the Klang Valley.

In fact, the company has launched projects, composed mainly of landed residential properties, worth RM339 million in GDV up to Q1 FY2019.

“The company recorded new sales of RM718 million in Q1 FY2019, whereby 94 percent were derived from local projects,” said AmInvestment.

Regarding its 40 percent stake in the JV Battersea project, the team noted that demand for residential units has been encouraging, with sales reaching £120 million (RM611.5 million) in the last 12 months.

“Phase Two (residential), comprising 255 units of apartments, has a GDV of approximately RM3.8 billion and is expected to be completed by the end of 2020. Revenue profit recognition is expected from Q4 FY2020 onwards,” said the team.

It added that over 90 percent of Phase Two residential properties have also been sold.

“FY19 earnings will be driven by higher sales due to the stamp duty waiver, inventory clearing efforts and lower interest expenses as a result of repayment of borrowings from the sale of Battersea Phase 2 commercial assets.”

“We are maintaining our FY2019 to FY2021 net profit forecasts at RM352.9 million, RM402.8 million and RM462.0 million respectively; and our fair value is unchanged at RM2.39 per share,” it said.


Image source from The Guardian 


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