Highlight SP Setia’s unbilled sales of RM9.6b to guarantee earnings for next 3 years

Highlight SP Setia’s unbilled sales of RM9.6b to guarantee earnings for next 3 years
Business & Markets 2013
Written by Jeffrey Tan & Zatil Husna of theedgemalaysia.com
Thursday, 12 December 2013 18:20

KUALA LUMPUR (Dec 12): SP Setia Bhd’s unbilled group sales of RM9.6 billion, which will be carried forward to FY14, will guarantee earnings for the next three years, CEO Tan Sri Liew Kee Sin said today.

Margin for the property group will jump in 2016, when profits from London and Australia are recognised, he told reporters at a press conference after releasing SP Setia’s latest results.

Liew said the property developer will be ‘in a good time’ for the next three years despite the ‘gloomy’ property market caused by a rise in real property gains tax (RPGT) and the prohibition of developer interest bearing scheme (DIBS).

“This is the ‘best year ever’ for SP Setia,” Liew said.

SP Setia reported that its sales for the financial year ended Oct 31, 2013, doubled to RM8.24 billion compared to RM4.23 billion last year.

“No other developer has ever done that, both domestically and internationally. It proves the point that five years ago, when we decided to expand overseas, the dividends are paying back now,” Liew said, while highlighting that the firm had exceeded its full-year sales target of RM5.5 billion.

“Just from Malaysian projects alone, it contributed RM4.9 billion. We beat everyone else in Malaysia already. No other developer has ever achieved this.”

Liew said the higher sales were due mainly to both its international and domestic projects.

Its international projects include the Battersea Power Station in United Kingdom, Eco Sanctuary in Singapore and Fulton Lane and Parque Melbourne in Australia.

The group’s domestic operations contributed about RM5 billion for FY13, which was 41% higher than last year.

“Klang Valley sales saw the highest growth with RM2.84 billion recorded versus RM1.85 billion secured in FY2012.

“This was largely due to the overwhelming demand for affordable homes launched in the group’s matured projects in Setia Alam and Precinct 15, Putrajaya, as well as continued strong take-ups achieved by the eco-themed Setia Eco Glades in Cyberjaya following its first launch at the start of the year,” he said.

Furthermore, the group’s projects in Johor Bahru achieved sales of RM1.6 billion -- which was 18% higher than last year.

“This solid growth from an already high base is largely due to the market leadership of the Setia brand down south as well as the positive interest in Iskandar projects prevailing during the year.”

In Penang and East Malaysia, sales of RM463 million and RM90 million were recorded respectively.

Liew said: “As far as profits are concerned, our profit before tax increased only marginally. This is due to the fact that profits from our projects in London and Melbourne can only recognise upon completion.”

“We incurred costs for our projects but profits are not recognised progressively. But come 2016 onwards, we can recognise profits from our projects in London and Melbourne… The margins will jump tremendously.”

For the fourth quarter ended Oct 31 (4QFY13), the group recorded net profit of RM127.29 million, marginally higher than RM127.02 million year-on-year (y-o-y). Its revenue for the 4QFY13 climbed to RM900.16 million from RM763.62 million previously.

For the full year period, the group’s net profit rose 6% to RM417.85 million from RM393.81 million y-o-y. Revenue rose to RM3.06 billion from RM2.52 billion previously.

S P Setia has proposed a final dividend of seven sen per share.

Despite being optimistic, Liew mentioned the firm would face challenges going forward.

Among the issues faced are increasing cost pressures as a result of skilled labour shortages, reduction of petrol subsidies in 2013 and electricity tariff hikes which will take effect in 2014.

This also includes the various policy changes recently announced by the Federal and various state governments, he added.

“Cost pressures will affect our domestic operations. But for those projects that have been sold, the costs have been covered already. The costs under the unbilled sales of RM9.6 billion has been covered,” said Liew.

“However, the concern lies with new projects that are yet to be launched.”

Moving forward, the SP Setia’s head said the firm will continue to focus on township projects and stressed that its vision has never changed.

“We will continue our international expansion, with focus on matured markets in the UK, Australia and Singapore,” said Liew.

On succession, he maintained that SP Setia’s COO Datuk Voon Tin Yow would succeed him as CEO of the firm, denying a local daily’s report that I&P Group Sdn Bhd CEO Datuk Jamaludin Osman will replace him. Liew is expected to quit SP Setia next year.