SP Setia registered 3QFY20 net loss of RM263.4m ( >-600% Yoy, -127.5% QoQ) primarily due to impairments for Battersea Power Station (BPS) in view of 1) potential delays of work in progress and 2) inventories under development (Phase 2 and Phase 3a) amid the Covid-19 pandemic. The results minus the write-down is estimated at a net loss of RM40.5m, which is still below our and consensus full year estimates. That said, we understand that there is possibility that the impairments could be reversed should the situation improve over time. YTD revenue declined 33% YoY as construction progress stalled during the movement control order (MCO) period in 2Q20. Sequentially, 3Q20 revenue more than doubled however as sites reopened post-MCO. Unbilled sales as at end-Sep 2020 stood at RM9.8bn. FY20 net profit estimate is cut by 288% to reflect the BPS impairments. We maintain our Neutral call with fair value of RM0.95 (c.75% discount to RNAV).

• Sold c.RM2.3bn in 9MFY20. YTD, group pre-sales was c.RM2.3bn vis-à-vis RM3.1bn achieved in the similar period in FY19. Post-MCO, Group pre-sales improved markedly to c.RM1.4bn, or about 60% more than what was achieved In the whole of 1H20 (RM875m). As of 31 Oct 2020, the group has secured c.RM2.86bn worth of new sales and has a booking pipeline of RM1.7bn. The Group will now focus on conversion of these bookings into S&P signed sales. We believe sales momentum could continue, with its RM3.8bn sales target possibly achievable.
• Unbilled sales at RM9.8bn. YTD, the Group secured total sales of RM2.3bn with local projects contributing RM1.85bn or c.82% of the sales whilst the remaining RM410m or c.18% were contributed by international projects such as UNO Melbourne, Sapphire by the Gardens and Marque Residences in Australia as well as Daintree Residence in Singapore. We understand that RM462m worth of completed inventories was offloaded during this period. All in, Group sales registered as at 31 October 2020 stood at RM2.86bn with unbilled sales steady at RM9.8bn.

Source: PublicInvest Research - 16 Nov 2020