KUCHING: SP Setia Bhd (SP Setia) recorded a commendable fourth quarter of financial year 2014 (4QFY14) despite the slowdown in the property sector, with analysts expecting its record high unbilled sales will continue to underpin its earnings visibility.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) in a note said SP Setia reported 4QFY14 earnings of RM131 million (an increase of 27 per cent quarter-on-quarter and an increase of three per cent year-on-year), taking FY14 earnings to RM406 million.
“The higher-than-anticipated 4QFY14 earnings was largely due to the strong turnaround of its construction division as well as higher profit recognition from completed projects,” the research arm highlighted.
AllianceDBS Research opined that its unbilled sales of RM11.1 billion will continue to underpin earnings visibility.
“The group has also set RM4.6 billion sales target for FY15, of which 60 per cent is targeted at the domestic market while the remaining will come from overseas,” it said.
Apart from that, AllianceDBS Research pointed out that SP Setia’s property sales was still resilient.
It explained that SP Setia has achieved RM4.6 billion property sales in FY14 largely due to the RM1.2 billion sales from the Battersea Power Station and RM2.1 billion from its other projects in Malaysia.
“While this is 44 per cent lower y-o-y, it is still a decent achievement given the weak sentiment in the property market.
“We are also positive on the strong response for its projects given the high take-up rates on most of its launches,” it outlined.
Some of the key launches in FY15 are Setia Eco Templer (gross development value of RM190 million) and Setia Eco Hill (gross development value of RM250 million) apart from its existing township developments such as the likes of Setia Alam and Setia Eco Park.
Meanwhile, the research arm of TA Securities Holdings Bhd (TA Securities) in a separate note increased its forecast on SP Setia’s FY15-16 earnings by nine to 11 per cent, due to earlier-than-expected profit recognition for its Australia and London projects.
“Fulton Lane @ Melbourne is now expected to be fully completed by May 2015, two months ahead of scheduled completion date.
“The staged handover of Fulton Lane will begin as early as December 2014. Over to London, Battersea Phase 1 is now 17 per cent completed and the expected completion is now scheduled in June 2016, as compared to the initial guidance of end 2016,” it said.
TA Securities further said it expects potential consolidation of PNB’s property entities such as Sime Darby Property, I & P Group and SP Setia that will create a mega property group to serve as a re-rating catalyst.
Overall, the research arm pegged a ‘hold’ call on the stock while AllianceDBS recommended a ‘buy’ for SP Setia.