A few days ago, the National Property Information Centre (NAPIC) released remarkable data on the value and volume of real estate transactions. According to the announcement, Malaysia achieved its highest real estate transaction value since 2001, reaching RM179.07 billion in 2022. Additionally,  real estate transaction volume experienced a double-digit growth in 2022, increasing by approximately 29.45% from 300,497 transactions in 2021 to 389,000 transactions.

However, given the challenging macroeconomic environment, NAPIC expresses concerns about the real estate market in 2023. Nevertheless, S P Setia Berhad (SPSETIA, 8664), one of Malaysia's largest property developers, has achieved commendable performance in the first quarter of this year.

Without further ado, let's delve into the latest quarterly performance (Q1FY2023) announced by SPSETIA yesterday.

Revenue Comparison (YoY +11.59%, QoQ -76.71%)

As of March 31, 2023, the company achieved approximately RM967.67 million in revenue, representing a year-on-year increase of about 11.59%. In terms of sales, SPSETIA recorded around RM1,030.00 million. The Malaysian projects accounted for 87.67% of the sales, totaling approximately RM903.00 million. Simultaneously, overseas projects contributed around RM130.00 million, representing approximately 12.62% of the sales.

The company's outstanding revenue primarily stems from land sales in Australia, the central region of Malaysia, and Selangor. These include Setia Alam, Setia Eco Park, Precinct Arundina, Setia Alam Impian, and Temasya Glenmarie in Shah Alam; Setia EcoHill, Setia EcoHill 2, and Setia Mayuri in Semenyih; Setia Eco Glades and Setia Safiro in Cyberjaya; Setia Eco Templer in Rawang; Setia Warisan Tropika in Sepang; Setia Alamsari (north and south) in Bangi; Bandar Kinrara in Puchong; Setia Bayuemas and Trio by Setia in Klang; Setia Sky Seputeh in Seputeh; KL Eco City in Jalan Bangsar; Bukit Indah, Setia Indah, Setia Tropika, Setia Eco Cascadia, Setia Business Park I and II, Setia Eco Gardens, Setia Sky 88, Taman Rinting, Taman Pelangi, Taman Pelangi Indah, and Taman Industri Jaya in Johor; Setia Sky Vista, Setia V Residences, Setia Sky Ville, Setia Greens, and Setia Fontaines in Penang; as well as UNO Melbourne and Sapphire by the Gardens in Australia.

Due to the handover of the UNO Melbourne (Phase 1) and Sapphire by the Gardens projects in the previous quarter (Q4FY2022), the company's revenue declined by approximately 76.71% compared to the preceding quarter.

Net Profit Comparison (YoY -17.85%, QoQ -38.60%)

Due to increased marketing costs and administrative expenses, the company's net profit declined by approximately 17.85% year-on-year and 38.60% quarter-on-quarter to around RM55.45 million.

Additionally, the rise in interest rates resulted in increased financial costs, which pressured the company's profitability in this quarter.

It is worth noting that as of March 31, the company has received total orders worth approximately RM512.00 million. Furthermore, SPSETIA successfully sold property inventory worth around RM107.00 million during this quarter.

Outlook

The management states that as of March 31, 2023, the company has the total unbilled sales amounted to RM7.17 billion, with 45 ongoing projects and a remaining landbank of 7,459 acres, indicating a total development value of RM128.02 billion. Hence, SPSETIA is poised for growth and resilience amidst the challenging market conditions.

All property companies suffered due to the pandemic. But from 2020 to 2022, SP Setia revenue grew at 17 % CAGR.  In contrast, the average revenue of the large Bursa property companies (those with SHF > 1 RM b) grew at 11 % CAGR from 2020 to 2022. SP Setia 1Q results seems to be a continuation of its past 2 years performance. Now whether this is good or excellent should be benchmarked agains the sector. If you want to see how the sector had done, go to Will the Malaysian Property industry turn around by 2024?