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CGS-CIMB: S P Setia plans to launch projects up to RM3.7b GDV in FY21

KUALA LUMPUR (Jan 7): CGS-CIMB Research gathered that S P Setia Bhd plans to launch projects worth up to RM3.7 billion in gross development value (GDV) in financial year 2021 (FY21), versus the RM2.8 billion planned GDV in FY20F, out of which about 94% will be in Malaysia.

"Some 54% of the total new launches would be projects with properties priced below RM1 million each, with the rest comprising properties priced above RM1 million each. In terms of product mix, about 67% will be landed residential units, followed by condominiums and apartments (14%), commercial units (9%), serviced apartments (4%), affordable housing (4%), and industrial units (2%)," said CGS-CIMB analyst Ngo Siew Teng in a report today.

"Notable launches will be in Setia Alam, Setia Eco Hill 1&2, Setia Alamsari, Bandar Kinrara, Temasya Glenmarie, Taman Pelangi, Setia Tropika, and Setia Fontaines," Ngo added.

The local research house hosted S P Setia's management yesterday at the former's annual Malaysia Virtual Corporate Day.

Ngo also pointed out that S P Setia is on track to hit FY20 sales target.

"S P Setia has guided for new sales of RM3.8 billion for FY20. As at Oct 31, 2020, it had secured about RM2.8 billion worth of new sales and a booking pipeline of RM1.7 billion. Given the pickup in sales momentum post-Movement Control Order and a good product mix skewed towards landed homes, the group should be able to achieve its FY20 sales target, in our view. We observe that its inventory of completed properties declined to RM1 billion in 3Q20 from RM1.4 billion in 4Q19, due to its ongoing monetisation efforts," Ngo stated.

She added that S P Setia has resumed its work at most of its project sites, at 80%-90% of the manpower capacity in compliance with the standard operating procedures to curb the spread of the Covid-19 pandemic.

The analyst expects the group to set a FY21F new sales target similar to its FY20 target and it would be mainly supported by local projects.

CGS-CIMB has an add call for the stock with an unchanged target price of RM1.06.

"We are positive on S P Setia given its attractive valuation (0.3x FY21F P/BV, lower than peer average of 0.4x), massive landbank to cater for changes in consumer preferences, and anticipated earnings improvement in FY21-22F," noted Ngo.

"We see limited downside as the stock has been trading at a trough valuation of c.0.3x P/BV since 2001. Stronger earnings delivery in FY21-22F and undemanding valuations are its key potential rerating catalysts," she added.

At the time of writing, S P Setia stock was down 2.09% or two sen to 94 sen. Its market capitalisation was at RM3.84 billion.

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