S P Setia soars to near six-year high as analysts bet on extended rally

• Shares of S P Setia has surged 95% so far this year, significantly outperforming the property sector’s 25% year-to-date increase, due to the slew of one-off gains. During the quarter, S P Setia has finalised two land deals in Johor, that yielded a net gain of RM380 million for the company.

KUALA LUMPUR (May 17): Shares of S P Setia Bhd (KL:SPSETIA) soared to their highest in nearly six years on Friday, as analysts continue to urge investors to buy the stock, even as its stock price has nearly doubled so far this year.

S P Setia climbed over 7% or 11 sen to RM1.64, its highest since October 2018. At 9.30am, the stock was trading at RM1.55, valuing the company at RM7.3 billion. More than 13.9 million shares changed hands, making it one of the most active counters on Bursa Malaysia.

The first-quarter core profit of RM18.7 million, after adjusting for preference shares distribution and currency gains, came in at 6% of consensus’ full-year estimate. Still, analysts remained broadly bullish on its outlook.

“S P Setia should see bumper earnings for FY2024 due to the expected substantial land sale gains in Johor and Selangor,” said Hong Leong Investment Bank (HLIB) Research. The company has yet to book proceeds from land sales in Alam Impian, Bandar Setia Alam and Setia Federal Hill, the research house noted.

If closed, the sale of the land could result in a total net gain of around RM530 million for S P Setia in FY2024, according to its estimates.

Shares of S P Setia has surged 95% so far this year, significantly outperforming the property sector’s 25% year-to-date increase, due to the slew of one-off gains. During the quarter, S P Setia has finalised two land deals in Johor, that yielded a net gain of RM380 million for the company.

Still, analysts expect more upside. A majority of nine out of 15 analysts tracking S P Setia recommend investors to “buy” the stock with target prices ranging from RM1.68 to RM2.00, according to Bloomberg. The remaining two have “hold” rating and four are on “sell” call.

Despite the rally, S P Setia is trading at a “modest” 0.4 times its forward earnings, compared to the industry average of 0.8 times, Maybank Investment Bank (Maybank IB) Research said. The research house maintains a “buy” rating on the stock, anticipating stronger earnings in the second and third quarters of 2024, bolstered by land sales.

On Thursday (May 16), S P Setia reported that its net profit for 1QFY2024 escalated to RM77.33 million, from RM55.45 million in the same period last year (1QFY2023), with revenue increasing a near 53% to RM1.48 billion, from RM967.67 million.

The robust performance is attributed to heightened revenue contributions from both domestic operations and ventures in Vietnam.

On its part, S P Setia aims to continue its growth with the launch of new projects with a combined gross development value of RM146.2 million during the quarter, while banking on favourable market conditions. The group said it’s on track to meeting its RM4.4 billion sales target for the year.

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