This article first appeared in The Edge Financial Daily on November 10, 2017 - November 16, 2017

KUALA LUMPUR: S P Setia Bhd announced yesterday its net profit for the third quarter ended Sept 30, 2017 (3QFY17) had surged 88.9% year-on-year to RM253.22 million from RM134.07 million, driven by contribution from its UK Battersea Power Station project.

This pushed its earnings per share to 7.11 sen for the quarter from 4.88 sen in the corresponding quarter a year ago, its filing with Bursa Malaysia showed. Quarterly revenue came in lower at RM842.49 million versus RM1.26 billion last year, on lesser overall recognition from its Malaysian operations as projects were completed and handed over in the previous quarter.

It said the lesser revenue recognition for the quarter under review is but a short-term transitional effect and a strategic move by the group, where launches were repositioned to address changes in market demand. “Nevertheless, it was mitigated by substantial staggered completion of phase one of the Battersea Power Station project during the third quarter, which contributed significantly to the group’s profit before tax,” it noted.

“October 2017 was a major milestone for S P Setia as the Battersea Power Station Phase 1 comprising 12 blocks, or 865 units were completed. Currently, more than 400 proud residents and tenants have already moved into one of Europe’s largest building sites. After more than 30 years of being a relic, the footfall visibility has started to transform the Battersea Power Station site into a trendy and upscale address for residents, locals and tourists alike to enjoy a unique blend of restaurants, shops, parks and cultural spaces,” said S P Setia president cum chief executive officer Datuk Khor Chap Jen in a statement. 

Meanwhile, the group has several phases of large developments — already substantially sold — that are still at the early stages of construction, for example, phase one of Setia Eco Templer in Rawang, ViiA Residences at KL Eco City and Setia EcoHill 2 in Semenyih.

For the first nine months of FY17 (9MFY17), the property developer’s net profit strengthened 29.1% to RM494.72 million from RM383.24 million a year ago. Cumulative revenue came in at RM2.58 billion versus RM3.19 billion last year, also due to the aforementioned reasons. For 9MFY17, the group secured sales of RM2.82 billion. Local projects contributed 59% of the total sales, with the remaining 41% from international projects, the statement read.

Local sales came largely from the central region (RM1.17 billion), while the southern and northern regions  combined contributed RM495.6 million. Outside Malaysia, its Sapphire By The Gardens in Melbourne, Australia, continued to outperform with a strong take-up of 83% amounting to RM871.7 million after less than four months from the launch date.

The Battersea Power Station project contributed an effective share of RM149.2 million in sales. Projects in Singapore and Vietnam contributed a total of RM89.4 million in sales, it added. “Notwithstanding the total sales achieved are within expectation, the local market remains subdued and the underlying demand is only strong for selective products and locations,” Khor said.

“However, demand in international markets has picked up, demonstrated by the higher current nine months sales which exceeded last year’s sales for 12 months.” As such, Khor said the group foresees a stronger contribution from its international projects for FY17.

Meanwhile, S P Setia plans to continue with launches of its mid-range landed properties in the Klang Valley with a combined gross development value (GDV) of RM2.03 billion in 4Q, notably in Setia Alam, Setia EcoHill, Setia Eco Templer and KL Eco City. 

The group is also expecting to complete the acquisition of I&P Group Sdn Bhd and its fundraising exercise in 4Q. Upon completion, S P Setia said, the group will become the third-largest property developer in terms of land-bank size. “The group’s prospects for the rest of the year remain positive with total unbilled sales of RM7.05 billion, anchored by 31 ongoing projects and effective remaining land bank of 5,384 acres with a GDV of RM79.82 billion [excluding I&P’s] as at Sept 30.

“Given the planned launches, the sustained momentum and the strong sales achieved to date, the group remains positive on achieving its sales target of RM4 billion for the current financial year,” it added.