S P Setia 1HFY22 core net income of RM127.4m came in within expectations, making up 46% and 45% of consensus full-year estimates respectively.
Sequentially, 2QFY22 core net income increased to RM72.7m (+32.9%qoq) mainly due to the higher volume of properties completed and handed over in 2QFY22. On yearly basis, 2QFY22 core net income was flattish, bringing cumulative core net income in 1HFY22 to RM127.4m (-29.2%yoy). The lower earnings in 1HFY22 were partly due to the lower sale of completed inventory of RM272m in 1HFY22. Besides, earnings in 1HFY21 were supported by contributions from projects in Singapore. Meanwhile, unbilled sales eased to RM8.71b in 2QFY22 from RM9.84b in 1QFY22, providing more than 2 years earnings visibility.
The developer recorded decent property sales of RM991m in 2QFY22, higher than new property sales of RM679m in 1QFY22. That brought total new sales to RM1.67b in 1HFY22. Local projects contributed 83% of total new sales while the remaining 17% were contributed by international projects. Looking ahead, management anticipates stronger sales in 2HFY22 and maintains a new sales target at RM4b for FY22. Sales momentum remains strong with a good take-up rate observed for its latest launches.
Note that the new phase in Setia Eco Templer enjoyed a good take-up rate of >90%. With this in perspective, MIDF is upgrading the stock to BUY with a revised TP of RM1.04. No changes are made to the earnings forecast for FY22/23F. TP for S P Setia is lower to RM1.04 from RM1.11 as MIDF updates the RNAV figures.
The TP is based on an unchanged 75% discount to RNAV. Upgrade call on S P Setia to BUY (from NEUTRAL) as the recent decline in share price makes valuation attractive. S P Setia is trading at a steep discount of 80% to NTA per share of RM3.47. Besides, the new sales outlook remains positive, underpinned by projects launched at its well-established township
