SP Setia to see maiden overseas returns in FY09

SHAH ALAM: SP Setia Bhd, Malaysia’s most valuable property developer, may begin harvesting maiden returns from its initial overseas venture in Vietnam as early as the current financial year ending Oct 31, 2009 (FY09).

This is in anticipation that the developer will rake in some RM100 million worth of landed residential property sales in the Indochina nation.

“We will work very hard to achieve this RM100 million (sales). We have never sold anything in Vietnam so far,” SP Setia group managing director and chief executive officer Tan Sri Liew Kee Sin told reporters after the company’s shareholders meeting here yesterday.

In June 2007, the developer entered into a joint venture agreement with Becamex IDC Corp and Treasure Link Far East Ltd to develop several parcels of land with a combined area of 226ha within the My Phuoc enclave of Binh Duong province.

The tract where SP Setia’s estimated RM2 billion EcoLakes at My Phuoc mixed development will be undertaken, is located 40km north of Ho Chi Minh City, and is about an hour’s drive from the Tan Son Nhat international airport.

Income from SP Setia’s ventures abroad is deemed timely. This is because the Malaysian real estate sector is heading to a downcycle, and the effects have hurt local property developers’ earnings.

But Liew said the firm would continue to reward shareholders with a 50% dividend payout from its annual net profit.

While its latest set of financials had emerged weaker, it is worth noting that the developer has existing unbilled property sales of about RM1.2 billion which could sustain earnings in the next two years.

Unbilled real estate sales refer to the value of properties sold which is yet to be recognised in a developer’s books.

SP Setia has some 1,600ha of undeveloped land in Malaysia, and another 240ha in Ho Chi Minh City. “We will focus on looking for good land to buy,” said Liew.

Meanwhile, SP Setia’s “5/95 Home Loan Package” has already yielded returns. Since its launch last month, the scheme has raked in some RM300 million worth of property sales so far, according to Liew.

“It’s beyond our expectations. The RM300 million sales involve landed properties across the board,” Liew said.

During FY08, SP Setia sold RM1.404 billion worth of properties. But FY09 figures could be lower at some RM1.1 billion against a backdrop of weaker economic outlook, according to Liew.

On the whole, SP Setia’s earnings fell in FY08. Net profit was down 17.9% to RM213.46 million from RM260.07 million in FY07 on lower gross profit margins, partly due to costlier building materials. Revenue, however, rose 15.7% to RM1.33 billion from RM1.15 billion.

Shares of SP Setia ended 1.2% or four sen lower at RM3.30 yesterday, for a market capitalisation of RM3.36 billion. A total of 721,600 shares were traded. The stock has gained 6.45% so far this year, outperforming the Kuala Lumpur Composite Index’s 2.25% rise.

By The EDGE Malaysia (by Chong Jin Hun)