SP Setia’s 1QFY20 net profit came in weak as expected at RM28.5m (- 62.0% YoY, -59.4% QOQ) with revenue partially dragged by the Movement Control Order (MCO) which resulted in closure of both the sales office and construction sites. 1QFY20 net profit is broadly within our estimates but slightly below consensus at 11% and 8% of our and consensus full year estimates. We expect Group net profit to continue to be weak at least in the 1H2020 but could see some recovery in 2H2020 if conditional MCO is lifted by early June. The Group secured sales of RM470m, mostly before implementation of the MCO. We understand that it has pipeline bookings amounting to RM723m. All told, the Group expects the trading environment to remain challenging near term and hence has revised its FY20 sales target lower from RM4.55bn to RM3.80bn Maintain Neutral with fair value of RM0.95 (c.75% discount to RNAV).

• Sold RM470m in 1QFY20. The Group achieved 1QFY20 sales of RM470m with RM723 million bookings in the pipeline. The MCO had hampered the signing of the Sale and Purchase Agreements, thereby delaying the conversion of these bookings into sales. Nevertheless, we understand that the Group continues to reach out and provide updates to property buyers via various digital communication platforms and is focusing on converting these bookings into sales currently. We also understand that it had launched projects worth approximately RM478m prior to the MCO. Take-up rates had been mostly encouraging.

• Unbilled sales at RM9.8bn. Granted, property sales could remain weak but the Group has c.RM9.80bn unbilled sales which ensures revenue visibility for the next two years. We believe that, albeit construction works at Battersea Power Station (BPS) having been halted or moving at a slower pace in its other overseas projects, the Group is still targeting to complete BPS phase 2 and 3A by 2021 and projects in Melbourne by 2022.

Source: PublicInvest Research - 15 May 2020