SP Setia : Easing financing to boost sales

• Measures to boost sales
SP Setia has launched a 5/95 home loan package yesterday to boost faltering sales. This campaign which will run for 3 months allows house buyers to pay just 5% downpayment while the remaining 95% will be financed by SP Setia’s panel of end-financiers. Interest cost during the construction period as well as legal fee and stamp duty for sales and purchase agreement, loan agreement and memorandum of transfer will be borne by SP Setia.
This incentive will likely boost sales especially among those who are looking to buy one in the near term but are holding on for bargains. While margins will be squeezed by around 2-3% due to additional costs, we view this positively as we believe this incentive will go some way in stemming declining property sales.
Furthermore, thinner margin is now the lesser of an evil now as compared to dwindling sales and the recent decline in building materials costs minimises the risk of cost overrun.
• Changing products to cater to current demand
We have previously alluded that SP Setia has the flexibility to change their product offering according to changing demand given their large landbank. Under current economic climate, the group will seek to maintain house buyers’ affordability by building houses with smaller built-up area. This will ensure that the absolute selling price of a house is affordable while at the same time, margin is preserved as selling price per square feet remains unchanged.
In line with this strategy, SP Setia will be launching 54 units 1 ½ storey bungalows at its award-winning Setia Eco Park with selling price around RM800,000 each which is reasonably affordable as compared to semidetached houses of over RM1m each launched in earlier phases.
• Reiterate sell call
It is still too early to quantify the impact on sales and margin at this juncture. While we are positive of SP Setia’s proactive action to generate sales, we believe recent price advances have overrun fundamentals. As such, we reiterate our sell call with unchanged target price of RM2.62
(25% discount to RNAV of RM3.50).