S P Setia Berhad FY23 core net earnings of RM330.9m came in above expectations, making up 147% and 191% of consensus estimates and of MIDF’s. The positive deviation was mainly due to disposal gain on land and lower tax rate in 4QFY23. Meanwhile, the group also announced a dividend of 1.34sen for FY23 which translates into dividend yield of 1.6%
Sequentially, the fourth quarter core net income jumped to RM177.5m due to land sales and lower tax rate which was lower at 39% against tax rate of 53.7% in the previous quarter. Meanwhile, the full year core net income was higher at RM330.9m contributed by land sales gain of ~RM110m and better margin. Gross profit margin improved to 31% from 24% in FY22 as land sales and cost savings upon project accounts finalisation widened gross profit margin. That has cushioned the impact of higher administrative expenses and higher finance costs. Meanwhile, unbilled sales declined to RM5.6b in 4QFY23 from RM6.76b in 3QFY23.
As for new sales, S P Setia recorded RM1.2b in 4QFY23 which was slightly lower than new sales of RM1.33b in 3QFY23 but overall the group achieved new sales of RM5.1b in FY23 which is ahead of its sales target of RM4.2b. The stronger than expected new sales were mainly contributed by land sales of RM836m however if they were to be excluded the group would have hit RM4.2b in FY23.
Looking ahead, the management has set new sales target of RM4.4b for FY24 with key launches that include phase 1 of Setia Federal Hill which is a JV with Mitsui Fudosan. Project GDV is at RM1.4b and management targets to launch the project in 3QFY24.
MIDF maintains a buy call on the stock with an unchanged TP of RM1.16 while also keeping its earnings forecast for FY24F/25F but has reduced its earnings forecast for FY26F. The house remains positive on S P Setia as new sales prospect is stable, supported by its township projects. Besides, that it said the valuation remains undemanding, trading at steep 75% discount to NTA per share of RM3.44.
