Stock Focus Slower sales and challenges seen for SP Setia in FY14

Stock Focus Slower sales and challenges seen for SP Setia in FY14
Business & Markets 2014
Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com
Friday, 21 March 2014 13:40

KUALA LUMPUR (Mar 21): Analysts now forecast slower sales for SP Setia Bhd in FY14 due to a sharp cut in sales target by the property company and comments made at a meeting yesterday.

SP Setia lowered its sales target for financial year ending October 31, 2014 (FY14) yesterday, after posting weaker first quarter results.

The company had set a sales target of RM5 billion for FY14, sharply lower than the RM8.2 billion recorded in FY13.

Tan Sri Liew Kee Sin, out-going president and chief executive officer (CEO), yesterday said the cooling measures introduced by the government are expected to result in subdued sales of the company’s properties.

“The government’s cooling measures are expected to take effect. But even at RM5 billion, we are still the biggest property developer in Malaysia,” said Liew after the group’s annual and extraordinary general meetings yesterday.

Liew said SP Setia’s unbilled sales of RM9.64 billion would be able to sustain the group’s earnings for the next three to four years.

In a note today, CIMB Investment Bank remarked that although sales of SP Setia were strong in 1QFY14, sales could be slowing down for the remaining quarters as February sales only amounted to RM200 million.

“We believe the slowing sales could be partly due to the imminent departure of CEO Tan Sri Liew Kee Sin, who resigned in January,” CIMB said while noting its CFO Datuk Teow Leong Seng also resigned at the same time.

Teow was initially slated to take over as deputy president of SP Setia after Liew’s departure, but instead both will be leaving the company by the end of April.

“We believe FY13’s record new sales of RM8.24 billion is unlikely to be surpassed this year,” said the research house.

CIMB has maintained its “hold” rating on SP Setia at RM2.95, with a target price (TP) of RM3.09.

HwangDBS Vickers Research forecasts “more challenges ahead” for SP Setia due to dampened demand for high-end properties, rising raw material costs and shortage of foreign skilled labour.

“SP Setia’s strong following and rising exposure to overseas projects should help cushion some of the impact, but we are skeptical it can beat its record RM8.2 billion sales in FY13 given lesser overseas launches,” said the research house.

HDBSVR has kept a “fully valued” call on the company and an unchanged TP of RM2.40.

At noon break, SP Setia was traded flat at RM2.95.