SP Setia Bhd has garnered positive analyst sentiment, with both MIDF Amanah Investment Bank Bhd (MIDF Research) and Maybank Investment Bank Bhd (Maybank IB) maintaining their BUY calls on the property developer.
MIDF Research has set an unchanged target price (TP) of RM1.67, while Maybank IB has a TP of RM1.64, citing the company's promising growth prospects, particularly within its industrial development and real estate investment trust (REIT) initiatives. Analysts expect SP Setia's upcoming ventures to drive strong returns over the next few years.
MIDF Research's upbeat outlook follows the company's 3QFY24 results briefing, where it reaffirmed its new sales target of RM4.4 billion for the year, with RM3.2 billion already secured as of 9MFY24. The growth is largely attributed to strong property development sales, complemented by land sales.
Despite a recent dip in share price, MIDF Research sees the valuation as attractive, trading at a 55% discount to the company's net tangible assets. The company is also poised to launch several major projects, including Setia Federal Hill Phase 1, which is expected to bolster new sales in FY25.
Maybank IB, similarly, highlights industrial parks as a major growth driver, particularly with developments in Setia Alaman, Tanjung Kupang and Setia Fontaines. The research house said these projects are expected to contribute significantly to earnings, especially with the anticipation of land sales and collaborations. Tanjung Kupang in Johor, with a gross development value of RM1.9 billion, is seen as a standout project due to its strategic location near Singapore and the potential for a high-tech park or data centre, Maybank IB added.
Furthermore, SP Setia's plans to list a diversified REIT within the next year are expected to provide additional revenue streams and enhance financial stability. The REIT will include retail malls, office spaces, Tenby schools, and convention centres, alongside industrial properties from the company's green industrial parks. With an estimated assets under management (AUM) of RM1.5 billion, the REIT will also allow the company to reduce debt and generate recurring income.
SP Setia's international ventures, particularly in Australia, are expected to support its long-term profit goals, with the company targeting a net profit of over RM700 million by FY29. Despite challenges, including its stake in the Battersea Power Station project, analysts remain optimistic, especially after receiving positive responses for new launches like the Parkside Residences.
Overall, both MIDF Research and Maybank IB maintained their positive outlooks, with expectations of steady growth from SP Setia's industrial developments, REIT formation and diversified property portfolio.
