S P Setia reports RM263.4m loss in 3Q due to Battersea Project JV's impairment

KUALA LUMPUR (Nov 14): S P Setia Bhd reported a wider net loss of RM263.4 million for the third quarter ended Sept 30, 2020 (3QFY20) compared with a net loss of RM131.5 million in 2QFY20, due to its share of impairment of RM336.3 million from the group's 40%-owned joint venture company, Battersea Project Holding Company Ltd (BPHC), in the UK.

Revenue for the quarter, however, surged 226% to RM1.08 billion from RM331.3 million in the preceding quarter, as the property developer saw overall better sales in Malaysia after the Movement Control Order, and higher take-up at its Daintree Residence project in Singapore.

The latest quarterly revenue is also up 16% from the RM932.07 million it recorded a year ago, when net profit came in at RM84.55 million.

"The shareholders of BPHC collectively resolved to recognise such impairment of its inventories under development amid the challenges presented by the COVID-19 pandemic and specifically the impact on the delivery of the Battersea Power Station project in London, UK. The said impairment does not have any impact on the group’s cash flow position," SP Setia said in a statement yesterday.

Excluding the aforesaid impairment, it would have made a profit before tax of RM117.2 million for 3QFY20.

It would also have reported a PBT of RM201.3 million for the nine months ended Sept 30 (9MFY20) — instead of a loss before tax of RM277.38 million now, which led to a net loss of RM376.51 million for the period, compared to a net profit of RM273.59 million in the previous corresponding period last year. Revenue for 9MFY20 came in at RM2.11 billion, down 33% from RM3.13 billion previously.

Meanwhile, the group said it secured total sales of RM2.26 billion for 9MFY20, with local projects contributing RM1.85 billion or 82% of the sales, while the remainder came mostly from overseas projects such as UNO Melbourne, Sapphire by the Gardens and Marque Residences in Australia, and the Daintree Residence in Singapore.

Local sales were mainly from the central region, which recorded RM1.36 billion in sales, it said, aided by RM306 million from the southern region and RM160 million from the north.

The total sales secured were also complemented by the concerted effort in clearing completed inventories, it said, as RM462 million worth of completed inventories were monetised during the period.

“We are heartened that as at Oct 31, 2020, our sales and secured bookings stood at RM2.86 billion and RM1.67 billion respectively. We noted that many potential buyers realised the importance of owning a home that complements their lifestyle and needs under the new norm.

“Our key focus for the next two months would be on the swift conversion of these bookings into sales, and hence, we believe we have a fair chance to achieve our sales target of RM3.8 billion set for this financial year,” S P Setia president and CEO Datuk Khor Chap Jen said in the statement.

He added that the 125bps cut in the overnight policy rate (OPR) had supported housing demand, particularly in the primary market, with a relatively strong recovery in loan application growth for residential property purchases seen, mainly in the owner-occupier and the mid and affordable market segments.

Khor also lauded the government’s proposal of full stamp duty exemptions on both instruments of transfer and loan agreement for purchases of properties priced up to RM500,000 by first-time buyers.

“The exemption will help to encourage sales to first-time homebuyers. Waiving this duty is a good move to help boost interest as it lessens the affordability gap for first-time homebuyers,” he said.

While economic conditions are challenging, he said many potential buyers are still on the hunt for a bargain and to take advantage of the incentives given, which was evidenced in the strong takeup rates recorded for several of the group's landed residential projects launched in 3QFY20, especially among the mid-range units.

S P Setia shares slipped one sen or 1.38% to close at 71.5 sen yesterday, giving it a market capitalisation of RM2.9 billion.

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