This article first appeared in The Edge Financial Daily on February 28, 2019

KUALA LUMPUR: S P Setia Bhd is targeting new property sales of 10% to RM5.65 billion for the financial year ending Dec 31, 2019 (FY19), after it achieved RM5.12 billion sales in FY18, surpassing its RM5 billion target set for the year.

S P Setia president and chief executive officer Datuk Khor Chap Jen said local projects contributed RM4.12 billion or some 80% to the tally, while international projects generated RM1 billion or approximately 20%.

With unbilled sales in the pipeline amounting to RM12.32 billion, 45 ongoing projects and a balance land bank of 9,516 acres (3,850ha)with an estimated gross development value of RM149.7 billion as at Dec 31, 2018, Khor expects the group to stay resilient against prevailing market challenges, saying the outlook remains positive.

“We think the current challenging (economic) condition will still carry on in 2019. But we believe that the residential property market has bottomed out, so the worst is over and it can only get better. But how fast it gets better this year will depend on whether there will be any catalysts in the property market.

“We hope the economy gets better so that the sentiment will get better. We also hope that the government relaxes the lending guidelines — this will help spur the market,” he told a press briefing on the group's FY18 results yesterday.

Khor said the company can see that the government is already helping with affordable housing, in which it has come up with incentives for the segment.

“But we are hoping it will extend (the incentives) to the broader market,” Khor added.

In order to achieve the sales target, S P Setia plans to launch RM6.8 billion worth of properties in FY19, comprising RM6.66 billion local launches and RM139 million international launches, with the latter being new phases in Eco Lakes and Eco Xuan in Vietnam.

The local ones are mainly concentrated in the central region, with RM4.98 billion worth of launches planned. The planned launches in the southern region total RM1.17 billion, while the tally is RM349.3 million in the north. To the east, it plans launches worth RM163.5 million.

Khor said the company’s unsold units are at a manageable RM1.4 billion level, and that they have been steadily decreasing over the last few years. The tally, he noted, is below 30% of the group’s total sales.

The group’s net profit from the continuing operations in the fourth quarter ended Dec 31, 2018 (4QFY18) fell 63% to RM101.55 million from RM276.03 million a year ago, as revenue dropped 23.4% to RM1.02 billion from RM1.33 billion, mainly on lower property development revenue.

The segment’s revenue came in at RM930.5 million versus RM1.26 billion a year ago, with pre-tax profit at RM224.2 million versus RM467.53 million previously. This was partly due to higher volume of development phases completed and handed over in the last quarter of FY2017, and because 4QFY17 had recognised profit from the completion of Phase 1 of the Battersea Power Station, it said in a filing with Bursa Malaysia.

“Projects in the UK and Australia have to adhere to the completion method of accounting for revenue recognition, hence the completion of such projects will normally have material upside impact on the group’s profit,” it said.

For the full FY18, S P Setia’s cumulative net profit from continuing operations retreated to RM670.96 million from RM993.7 million a year earlier, as revenue declined to RM3.59 billion from RM4.29 billion.

The group declared a final dividend of 4.55 sen per share, which brings its full-year FY18 payout to 8.55 sen per share, a payout ratio of 70.1%.