PETALING JAYA: S P Setia Bhd’s strategic portfolio restructuring, debt reduction and cost optimisation is likely to continue enhancing the group’s financial resilience, as its new revenue streams bring additional growth levers.
Hong Leong Investment Bank (HLIB) Research said all the strategies and initiatives will set the group up for more sustainable earnings growth.
In a report, HLIB Research said the property developer achieved RM1.82bil in sales for the fourth quarter of financial year 2024 (4Q24), bringing the financial year (FY24) total to RM5.02bil.
“Notably, 4Q24 sales were exceptionally strong. We anticipate the strong momentum to carry through to 1Q25 as the group converts the bookings from its newly launched Setia Federal Hills to sales,” the research house said.
As at FY24, unbilled sales stood at RM4.09bil, while for this year, the group will set a sales target of RM4.8bil, a decrease of 4.4% from sales in FY24.
HLIB Research noted that despite the group being saddled with high debt levels, recovery in domestic property markets in the last few years opened up opportunities for portfolio restructuring and debt reduction.
“Capitalising on this, the group has actively monetised some of its lands and assets, leading to a substantial decline in net gearing from a peak of 91% in 3Q22 to 46.3% as of 4Q24.
“They also embarked on a cost rationalisation exercise recently, which should help to lower administrative expenses and improve operational efficiency moving forward,” HLIB Research said.
The earnings growth trajectory is further strengthened by S P Setia’s venture into the industrial segment, marked by the launch of Setia Alaman Industrial Park in Selangor and the upcoming Tanjung Kupang Industrial Park in Johor.
With that, HLIB Research said it will maintain its “buy” call on the group with an unchanged target price (TP) of RM1.80.
Meanwhile, TA Research said it, too, will maintain its “buy” call on the property developer with a TP of RM1.92 as it foresees a chance for them to accelerate townships and industrial developments, and expand its global footprint, while establishing a real estate investment trust (REIT).
It said key initiatives include expanding its eco-themed townships driving RM15bil gross development value from SetiaGreen Industrial Park, and reinforcing regional expansion.
It added the planned REIT launch will diversify revenue streams and enhance recurring income, strengthening long-term financial resilience, particularly to fund developments like Atlas Melbourne and Setia Federal Hill.
The planned REIT that is set to be listed within the next nine months to a year will target a valuation of RM1.5bil and include malls, offices, schools, convention centres, hotels and industrial properties.
“We estimate that retaining a 40% to 60% stake in the REIT could generate RM600mil to RM900mil in cash proceeds, strengthening S P Setia’s liquidity for future growth.
“Management is also optimistic and has set a sales target of RM4.8bil whereby the bulk of sales will come from local projects,” it noted.
Furthermore, the Tanjung Kupang Industrial Park to be launched this year will be Malaysia’s first circular eco-industrial park and integrate data centre components to meet growing demand.
TA Research said it introduced its FY27 net profit forecast of RM541.4mil, to reflect a 6.8% year-on-year growth.
