Research firms mixed over SP Setia’s future growth

KUALA LUMPUR: Analysts have expressed mixed views over SP Setia Bhd’s future growth, in view of the property player’s weaker earnings visibility in the near term.

MIDF Research, in downgrading the stock to “neutral” with revised target price of RM3.10 from RM3.69 per share, said the downward revision was underpinned by slower-than-expected progress billing of local projects and weaker earnings outlook and limited upside.

Kenanga Research has maintained its “outperform” call on SP Setia with unchanged target price of RM3.50 per share, noting that the property player was confident of meeting its RM5 billion sales target this year, backed by RM4.05 billion worth of new launches in the second half.

“It also appears that the sale of the Battersea Phase 2 Commercial project, backed by the Employees Provident Fund and Permodalan Nasional Bhd, which has an estimated value of £1.6 billion (RM8.43 billion), is on track with targeted signing of this deal by end of next month.

“This certainly alleviates cash call concerns,” said the firm.

Kenanga Research said SP Setia had made its maiden foray into Japan with Izumisano City Centre in Osaka, which carried a tentative gross development value (GDV) of RM1.88 billion.

“We are excited about this project, given its prospects of being near Kansai International Airport, Rinku Premium Outlet and Japan’s soon-to-be first integrated casino resort, which should attract foreign investors.”

SP Setia, which is actively clearing its inventories, would look to dispose of its non-strategic landbanks to help alleviate its net gearing levels, said Kenanga Research.

Public Investment Bank Bhd (PublicInvest) said SP Setia would focus more on the local market, emphasising the launch of mid-range landed properties in the Klang Valley.

“We believe it is still on track, given the planned pipeline projects with a combined GDV of up to RM4 billion, of which twothirds will be local projects and the remaining from overseas.

“Unbilled sales rose slightly to RM8.12 billion from RM7.95 billion a quarter ago.

“We still expect the group’s earnings to recover gradually this year with full recovery in the next financial year, underpinned by contributions from overseas projects,” it said.

PublicInvest has also maintained an “outperform” call on the firm with unchanged target price of RM4.50.

Key launches by SP Setia included new phases in Setia Alam, Setia Ecohill, Setia Ecohill 2, Setia Eco Templer, Setia Eco Glades, Setia Sky Seputeh (Tower B), Temasya Glenmarie, Setia Alamsari and Setia Alaman.

The projects had a combined GDV of RM2.23 billion.