KUALA LUMPUR – SP Setia Bhd is maintaining its financial year (FY) 2021 new sales target forecast, which could be lifted by strong sales and bookings secured prior to the full movement control order, despite the lockdown in the country.
CGS-CIMB said in a research note that the new sales target of RM3.8 billion would likely be supported by the property developer’s RM1.1 billion in new sales and RM1.3 billion in bookings secured in the first quarter (Q1) of 2021.
“The extension of the Home Ownership Campaign to June 1-December 31 from June 1-May 31 is positive for developers, as this could spur property buying sentiment in light of the property industry’s current supply glut and nationwide lockdown,” it said following a recent meeting with SP Setia.
The stockbroking firm has reiterated an “add” rating to SP Setia with an unchanged target price of RM1.42 per share.
“We like the company for its attractive valuation, massive land bank to cater to changes in consumer preferences, and anticipated earnings improvement in the FY2021-2022 forecast.”
Meanwhile, it said SP Setia is also not expecting its project handover to be delayed, although revenue recognition could be weaker due to the strict standard operating procedures onsite.
The company revealed that the latest take-up rate for phases two and 3A of its Battersea project in London was 80% as of end-July 2021.
Construction of phase two’s Switch House West (98 units) was completed at end-March 2021 while the rest of phase two will be completed between now and August 21.
“We gather the handover of Switch House West started on May 21 and the half-a-million square feet of office space in the power station building was handed over to Apple in July 2021 as well. “Phase 3A (Electric Boulevard) is expected to be completed between November 2021 and April 2022,” said CGS-CIMB.
On the local front, as sales galleries are not allowed to operate under phase one of the National Recovery Plan, SP Setia is currently engaging potential buyers via digital marketing initiatives and virtual events.
It has also deferred some of its hotel openings to 2022-2023 given the travel restrictions and high number of Covid-19 cases globally.
“Stronger earnings delivery and undemanding valuations are the key potential re-rating catalysts.
“Further deterioration in Malaysia’s property market is a key downside risk to our call,” said CGS-CIMB. – Bernama, August 5, 2021
