S P Setia has received a positive boost following a recent clarification on the RM101 million loss reported in 2Q24 from its 40%-owned Battersea Power Station (BPS) project. Analysts sai the company's management provided detailed insights during last Friday's meeting, addressing concerns related to the loss and the company's future growth trajectory.
Analysts have upgraded SP Setia to a BUY, with a target price of RM1.64, reflecting a 26% upside from the current share price of RM1.30. This decision is underpinned by a revised earnings forecast, maintaining the unchanged 0.5x FY25E price-to-book ratio. The upgrade highlights the firm's strong future prospects, particularly in the realm of industrial parks and township projects.
S P Setia said the 2Q24 loss of RM101 million primarily stemmed from several factors: a provision related to a five-year rental guarantee for an office building sold to PNB in 2021, resulting in a GBP19 million shortfall due to current market conditions; impairments from discounts on unsold units in Phases 2 and 3C of the BPS project; and accumulated interest costs. However, the group anticipates that future provisions for the office building will be limited, with a target occupancy rate of 80-90% by the end of 2024.
Moving ahead, the group is set to leverage its industrial parks and township projects for substantial earnings growth. The Setia Alaman project, with a gross development value (GDV) of RM3.1 billion and spanning 399 acres, is expected to contribute significantly from FY25. Additionally, the Tanjung Kupang industrial park, valued at RM1.9 billion and covering 307 acres, is slated for finalisation within 2-3 months. This park may include data centres through various potential models, including land sales, built-to-lease agreements, or joint ventures with data centre operators.
SP plans to list its investment properties by 2025 remain on track. Potential assets for listing include offices, malls, hotels, and a convention centre. Currently trading at 0.4x FY25E price-to-book value, compared to the industry average of 0.8x, the stock presents an attractive investment opportunity.