Maybank IB upgrades S P Setia for undemanding valuation, target price 70 sen

• In a note on Thursday (May 18), the research house said 3M23 property sales of RM1.03 billion were also in line, accounted for 25% of its RM4.2 billion FY23 sales goal (+2.2% y-o-y).

KUALA LUMPUR (May 18):  Maybank Investment Bank Research has upgraded S P Setia Bhd (SPSB) to “Buy” at 53 sen with an unchanged target price (TP) of 70 sen and said SPSB’s 1Q23 core net profit of RM50.3 million (-7.6% y-o-y, -49.3% q-o-q) was in line with estimates.

In a note on Thursday (May 18), the research house said 3M23 property sales of RM1.03 billion were also in line, accounted for 25% of its RM4.2 billion FY23 sales goal (+2.2% y-o-y).

“Balance sheet wise, SPSB expects net gearing to reduce to 0.5x by end-2023 with asset/land sales.

“We fine-tune our earnings forecasts by 1%. Our TP is intact at 70 sen on 0.2x FY24E PBV.

“We upgrade SPSB to BUY for its undemanding valuation,” it said.

Maybank IB raised its FY23/24/25E earnings forecasts for SPSB marginally by 1%/1%/0.4% to factor in faster-than-expected inventory sales.

“SPSB now trades at an undemanding 0.18x/0.12x PBV/PRNAV.

“We believe share price has more than priced in its relatively-weak balance sheet (0.56x net gearing at end-1Q23).

“SPSB is in advance stage of negotiation for the disposal of non-core landbank which could materialise in 2Q/3Q23 and 4Q23. With non-core land sales, SPSB expects net gearing to decline to 0.5x by end-2023,” it said.