SP Setia (SPSB)’s 4QFY23 net profit came in stronger than expected driven by high billings due to handover of few projects during the quarter. Group net profit of RM298.6m (-1.9% YoY) in FY23 surpassed both our and consensus full year estimates. Separately, net gearing improved further to 0.49x, from 0.56x in 1QFY23 which also came in better that its target of 0.5x by end-FY23. The Group also surpassed its FY23 sales target by 21%, after securing total pre-sales of RM5.1bn in FY23 driven by strong demand for its launches and land monetisation. Separately, dividend of 1.34 sen per share was declared. NO change to our earnings estimates. The stock price has softened since the announcement of the cancellation of the proposed land disposal to the Scientex JV and we believe riskreward is attractive now and hence we upgrade our call to Outperform call with TP unchanged at RM1.00 pegged at ~65% discount to its book value (vis-à-vis sector average of ~0.4x to book value). We like the stock for its undemanding valuations and well-located landbank

• FY23 property revenue dropped 4% YoY to RM4.06bn primarily due to the completion of Daintree Residence in Singapore in FY22, mitigated by higher contribution from Australia with the handover of UNO Melbourne Stage 2 and domestic property development revenue. PBT, however, was higher by 13.8% YoY to RM710.2m mainly due to higher margin from land sale, cost savings from project accounts finalisations, higher interest income, reduced by higher financing cost from hikes in interest rates and higher share of loss from a joint venture. Unbilled sales stood at RM5.6bn as at end-FY23.

• Aims to Sell RM4.4bn in FY24. In FY24, the Group will continue with its development plans in Vietnam and Australia, where for the latter, the Group expects to maintain the momentum of its existing presence in Australia, which will be strengthened through the development of the newly-acquired Sydney land. Within Malaysia, the focus will again be on the projects at the Central region with industrial offerings in Setia Alaman Industrial Park,Klang, Selangor, and the two residential towers by Setia Federal Hill in Jalan Bangsar, Kuala Lumpur. Other project launches will come from its 41 on-going projects, with a remaining land bank of 6,311 acres and an effective remaining GDV of RM119.74bn.

Source: PublicInvest Research - 1 Mar 2024