PETALING JAYA: S P Setia Bhd remains optimistic about the property market’s prospects, given its good product mix and the diversified geographical location of its projects.
Additionally, the group’s focus to pare down its debts this year should put it on a better footing as the economy strengthens.
Given its optimism, the group’s management has set a sales target of RM4bil for the financial year ending Dec 31, 2022 (FY22), including RM3.6bil in domestic and RM400mil in overseas projects.
Internationally, its new launches would be coming from Vietnam as the group’s properties in Singapore and Australia have already sold out. It is also exploring additional land bank in Australia.
S P Setia achieved RM876mil worth of sales in the fourth quarter of 2021, bringing FY21 sales to RM4.26bil (including RM222mil of land sales), exceeding the sales target of RM3.8bil.
MIDF Research pointed out that new sales momentum in FY21 was supported by the Home Ownership Campaign (HOC).
“New sales in FY21 were mainly contributed by local projects (82%) while international projects contributed 18% to new sales.”
As such, the research house opined that new property sales could be tepid this year, partly due to the absence of the HOC.
However, CGS-CIMB Research believes that S P Setia’s FY22 earnings per share growth would remain strong due to the handover of overseas projects. It also noted that the developer has a massive land bank, allowing it to cater to changes in consumer preferences.
“It is also a likely beneficiary of rising demand for green-certified buildings as it has experience in obtaining green certifications for buildings and possesses in-house industrialised building system manufacturing facilities,” said CGS-CIMB.
The brokerage has an “add” call on S P Setia with a target price of RM1.84.
It noted that the counter enjoys a cheap FY22-FY24 valuation of 0.42 times price-to-book value, which is below its peers’ 0.48 times.
MIDF, meanwhile, retained its “neutral” stance on the stock with a target price of RM1.33.
However, Hong Leong Investment Bank Research (HLIB Research) has expressed concern on the group’s high gearing of 0.96 times as at end 2021, which has inched up from 0.95 times in the third quarter of 2021, including its redeemable convertible preference shares.
“Despite the encouraging property sales and expectation of better recovery ahead, we remain concerned on S P Setia’s high gearing as we believe earnings will remain under pressure from the high financial obligation,” it said.
HLIB Research maintained its “hold” rating on the counter with an unchanged target price of RM1.26.