Profit and sales fell short
SPSB’s 1Q22 core net profit of MYR54m (-49% YoY, -56% QoQ) was below
expectations. Sales wise, SPSB’s 3M22 actual sales of MYR679m only
accounted for 16% of its FY22 sales goal of MYR4b (-6% YoY). We lower our
FY22-24 earnings forecasts by 19-21% and our TP to MYR1.06 (-36sen) on a
lower 0.3x FY22 PBV (from 0.4x) on its relatively high net gearing of 0.63x
(vs. industry avg’s 0.33x) where earnings will be hurt amid rising interest
rate environment. D/G to HOLD.
Dragged by the shortage of labour and raw materials
Excluding MYR13m one-off (incl. MYR12.8m forex), SPSB reported 1Q22
core net profit of MYR54.4m (-49% YoY, -56% QoQ) or equal to 12%/14% of
our/consensus full-year estimates. The earnings gap was due to slower-than-expected work progress on the shortage of raw materials and labour. Also, earnings would be stronger in 2H22 with the handover of Battersea Power Station Phase 2 and 3A as well as Melbourne projects. 1Q22 net
gearing continued to inch up to 0.63x, from 0.61x in end-4Q21.
Maintain MYR4b sales target for 2022
SPSB has managed to lock in property sales of MYR679m in 1Q2022 (61%
Klang Valley; 92% of local sales) or 16% of its FY22 sales target of MYR4b (-
6% YoY). Despite the slower sales in 1Q22, management is keeping its FY22
sales target and expects sales to pick up significantly in 2H22 with MYR4b
worth of new launches (56% of the launches are below MYR1m/unit). As at
Mar 2022, SPSB has MYR655m worth of bookings. Unbilled sales stood at
MYR9.8b (2.1x our FY22F revenue) as at Mar 2022.
Earnings adjustments
We lower our FY22/23/24 earnings forecasts by 21%/20%/19% to factor in
higher interest rate (+50-75bps). We have also assumed slower work
progress and removed the land sales to Scientex for now. Elsewhere, the
conversion rate, issue price and entitlement basis for its proposed RCPS-i
C (5.43% dividend rate; to raise MYR850m to MYR1.18b in gross proceeds)
will only be revealed by 4Q22.