KUALA LUMPUR: Analysts have mixed call over SP Setia Bhd’s future growth in view of weaker earnings visibility in the near term.
MIDF Research, downgrading the stock to ‘Neutral’ with revised target price of RM3.10 from 3.69 per share, noted the downwards revision is underpinned by slower-than-expected progress billing of local projects and weaker earnings outlook and limited upside.
The research house has also revised the property developer’s financial year ending December 31, 2018 (FY18/19) earnings forecast between 29 per cent and 14 per cent.
Kenanga Research said it has maintained ‘outperform’
on SP Setia with an unchanged target price of RM3.50 per share, noting that SP Setia is confident in meeting its RM5.0 billion sales target this year, backed by RM4.05 billion worth of new launches in the second-half of 2018.
"It also appears the sale of Battersea Phase 2 Commercial project with Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB) that has an estimated value of GBP1.6 billion, is on-track with targeted signing of this deal by end Sep 2018
"This certainly alleviates cash-call concerns," the research firm noted.
Kenanga Research said the SP Setia has also made its maiden foray into Japan with its Izumisano City Centre (ICC), Osaka, Japan which carries a tentative gross development value (GDV) of RM1.88 billion.
"We are excited about this project given its prospects being near Kansai International Airport, Rinku Premium Outlet and the soon-to-be Japan’s first integrated casino resort, which should attract foreign investors,” it said.
SP Setia also actively clearing its inventories and will look to dispose non-strategic landbanks which will help alleviate its net gearing levels, Kenanga noted.
Public Investment Bank Bhd said SP Setia would focus more on the local market, emphasising to the launches of mid-range landed properties in the Klang Valley.
"We believe it is still on track given the planned pipeline projects with combined GDV up to RM4 billion, of which two-thirds 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 FY19, underpinned by contributions from overseas projects,” it said.
PublicInvest has also maintained an ‘Outperform’ call with unchanged target price of RM4.50.
Among the key launches by SP Setia include 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 with a combined GDV of RM2.23 billion.
In the Northern region, Setia Fontaines, a landed property project, will be unveiled in the fourth-quarter 2018.
As for overseas projects, it could unveil Daintree Residence at Toh Tuck Road (Singapore) which has a GDV of SG$D480 million about RM1.4 billion.
SP Setia’s net profit in the second-quarter (Q2) ended June 30, 2018 catapulted 76.69 per cent to RM442.74 million from RM250.57 million in the same period a year ago.
This is attributed to higher property sales and one-off provisional fair value gain arising from re-measurement of existing equity stake in Setia Federal Hill Sdn Bhd.
Its second quarter (Q2) revenue rose 6.88 per cent to RM925.97 million from RM866.35 million previously mainly due to properties sales completion and one-off provisional fair value gain.
For the first-half (1H) of 2018, S P Setia’s net profit surged 39 per cent to RM504.23 million from RM362.68 million, while revenue decreased 16.4 per cent to RM1.58 billion from RM1.89 billion.
The group secured sales of RM2.11 billion in 1H 2018, of the total, local projects contributed RM1.41 billion, which is two-thirds of the total sales while International projects contributed RM705.3 million or one-third of the total sales.