S P Setia shares surge on better than expected 4Q earnings

• At least five analysts covering SP Setia raised their recommendations to "buy".

KUALA LUMPUR (March 1): Shares in S P Setia Bhd surged in early trade on Friday, as more analysts turned bullish and saw more upside following the property developer’s above-consensus fourth-quarter earnings.

S P Setia rose as much as 5.3% to 89 sen before paring gains to 87 sen — still up 2.5 sen or 3% — at 10.22am, giving it a market capitalisation of RM3.85 billion and bucking the property sector’s sharp decline. The benchmark index FBM KLCI was slightly lower.

At least five analysts covering SP Setia raised their recommendations to "buy".

S P Setia has “hit an inflection point and its prospects are improving” supported with lower net gearing, reacceleration in property launches, as well as improving Battersea prospects, said Hong Leong Investment Bank, which upgraded its rating to "buy" with a higher target price (TP) of RM1.07.

Out of 15 analysts covering the stock, eight have "buy" calls, while five have "hold" and two "sell" recommendations, according to Bloomberg data. The median TP is RM1.02, a potential gain of about 17.2% from the current level.

The counter has climbed more than 9% so far this year, outperforming the property sector’s 5.8% rise. Over the past 12 months, S P Setia has racked up more than 43% gains on Bursa Malaysia.

TA Securities flagged S P Setia’s improving risk-reward profile in its latest research note following the results announcement and similarly upgraded its rating on S P Setia to "buy". RHB Investment Bank, which also upgraded its rating on S P Setia to "buy", cited “convincing” turnaround plans and improving net gearing.

S P Setia will also “look to execute its industrial expansion plans” beginning with Setia Alaman, which may start by June, and this expansion could drive further land disposals or joint ventures for industrial developments, RHB noted.

“This should, in turn, help pare down debts further, easing the company’s financial burden going forward,” RHB added. 

On Thursday, S P Setia reported a 71.12% jump in its fourth quarter profit ended Dec 31, 2023 (4QFY2023) to RM148.24 million from RM86.63 million a year earlier, despite revenue falling 18.98% year-on-year to RM1.38 billion from RM1.71 billion.

Full-year net profit slipped by a marginal 1.92% to RM298.57 million from RM304.4 million in FY2023, as revenue fell 1.81% to RM4.37 billion from RM4.54 billion.

For FY2024, S P Setia set a new sales target of RM4.4 billion, and the company will prioritise accelerating township and large-scale industrial developments while further strengthening its global footprint.

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