Unbilled sales in 2023 set to propel S P Setia

PETALING JAYA: S P Setia Bhd is expected to see an acceleration in recognition of its unbilled sales this year, on the back of easing labour shortage conditions and ongoing Australian projects.

Hong Leong Investment Bank Research noted that the property developer will recognise most of its remaining unbilled sales from its Australia projects amounting to RM1.41bil in the first quarter of 2023.

“Given the positive cash flow from its Australia projects, S P Setia’s net gearing as at the fourth quarter of 2022 improved to 0.81 times (from 0.9 times in the third quarter of 2022).”

The research house added that Bank Negara’s recent rate hike pause should also augur well for the group, giving it much needed breathing room to lower its net gearing.

Meanwhile, TA Research said it is raising S P Setia’s 2023 earnings by 46%, largely to reflect the delayed recognition of Australia projects and the sale proceeds of land in Johor.

“Meanwhile, 2024 earnings are adjusted marginally higher by 0.6%.

“Our 2023, 2024 and 2025 new sales assumptions are RM4.2bil, RM4.35bil and RM4.35bil, respectively. We introduce our 2025 net profit of RM157.6mil, representing a growth of 4.1% year-on-year.”

In terms of the construction status of its two Australian projects, TA Research said the group’s Sapphire by The Gardens is fully completed, while Uno Melbourne’s Stage 1 is 100% completed and Stage 2 is 73% completed.

“As such management is confident that the remaining unbilled sales of RM1.4bil will be fully recognised this year.”

Maybank Investment Bank Research (Maybank IB) meanwhile said S P Setia has set a flattish sales target of RM4.2bil in 2023 (compared with RM4.1bil achieved in 2022), driven by RM6.2bil worth of new launches.

“As at December 2022, S P Setia had RM385mil worth of bookings. Unbilled sales stood at RM7.3bil.”

Separately, in view of the strong demand for industrial properties, Maybank IB noted that the company has allocated 400 acres and 321 acres of land in Klang and Port of Tanjung Pelepas, respectively, for industrial development.

“Elsewhere, it is in advanced stages of negotiations for the disposal of a non-core landbank,” said the research house.

Meanwhile, Affin Hwang Investment Bank noted that S P Setia has set a slightly higher (year-on-year) sales target of RM4.2bil for 2023, as the developer is confident of stronger domestic sales.

“Bookings of RM385mil as at end-2022 are expected to contribute to sales in the first quarter of 2023,” it said, adding that the high unbilled sales as at end-2022 will provide good earnings visibility.

“Net debt was reduced 13% quarter-on-quarter to RM8.75bil at the end of the fourth quarter of 2022, due to strong operating cash inflow of RM1.69bil.”

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