KUALA LUMPUR: SP Setia Bhd should see bumper earnings for financial year 2024 (FY24) due to the expected
substantial gains from two land sales in Johor, said Hong Leong Investment Bank Bhd (HLIB).
HLIB also said SP Setia's balance sheet continues to show encouraging improvement with net gearing in the first quarter of 2024 declining to 63.1 per cent from 68.2 per cent in 4Q23.
The firm revises SP Setia's FY24/25 forecasts by 111.3 per cent/-2.4 per cent to account for the two Johor land sales contribution in FY24.
SP Setia announced that it had secured two Johor land sales in 1Q24
for (Taman Pelangi Indah 2 (sales proceed: RM564 million, estimated net gain: RM333 million), and (Taman Pelangi (sales proceed: RM167 million, estimated net gain: RM47 million).
HLIB expects further reduction in net gearing arising from the Johor land sales.
HLIB said the improving property market has facilitated SP Setia's ability to monetise and activate its assets as evident from its recent land sales with some secured at attractive margins.
It added that the strengthened balance sheet also positions SP Setia better to accelerate its project launches.
HLIB maintained its "Buy" call with a higher target price of RM2.00 from RM1.07 previously based on a lower 50 per cent discount (from 75 per cent previously) to its estimated real net asset value of RM4.01.
"We lower our RNAV discount as the improved property sector and the group's strengthened balance sheet have enhanced its ability to monetise and activate its landbank.
"With decreasing net gearing, active asset monetisation, and accelerated project launches, the group's
prospects are looking favourable," it said.