PETALING JAYA: S P Setia Bhd will likely beat its own sales target for the financial year ending Dec 31,2021 (FY21) based on the strong pick up seen in the first quarter of the year.
The property developer has earlier set its official sales target at RM3.8bil for FY21. This would be supported by RM3.7bil worth of new launches for the year.
In addition, S P Setia is also expected to resume its dividend payment to shareholders this year post the completion of its Battersea Power Station (BPS) Phase 2 and 3A projects in the UK.
The improving prospects for S P Setia for FY21, plus the undemanding valuation of the counter, were reasons Maybank Investment Bank Research (Maybank IB) maintained its “buy” call on the property developer’s shares, with an unchanged target price of RM1.39.
This would present an upside of about 21% from the current share price.
Maybank IB noted its target price was based on 0.4x the estimated FY21 price-to-book value (PBV) of S P Setia.
It said S P Setia was currently trading at an undemanding valuation of 0.3x PBV and 0.3x price/realised net asset value (P/RNAV) versus the industry’s 0.5x PBV and 0.4x P/RNAV.
“Judging from the strong sales momentum in the first quarter, S P Setia stands a good chance to beat its official sales target of RM3.8bil for FY21 (FY20: RM3.8bil), ” Maybank IB said in its report following a recent conference call with the company.
“However, it is keeping its FY21 sales target for now, supported by RM3.7bil worth of new launches, ” it added.
It said S P Setia had been carefully launching new units, and so far, only new phases at existing township projects were launched.“S P Setia is reviewing its capital structure to leverage on the current low interest rate environment.
“It is also looking to dispose of 1,295 acres of non-core landbank worth RM2bil in market value, ” Maybank IB said.
In addition, it revealed S P Setia had expressed its intention to resume dividend payment and reward its ordinary shareholders this year.
This came as BPS Phase 2 (expected completion: March-August 2021) and Phase 3A (expected completion: November 2021-March 2022) were at tail end and there was no urgent need of immediate funds for future developments at BPS project.
S P Setia halted dividend payment in FY20 after reporting a net loss of RM321mil, caused mainly by impairments.
“The assessment on its unsold stocks’ saleability was made in the worst-case scenario last year and hence, management does not expect further impairments in the coming quarters, ” Maybank IB said.