SP Setia (SPSB) reported 1QFY24 net profit of RM77.3m (+39.5% YoY, -47.8% Qoq) which is largely within our and consensus estimates. Despite 1QFY24 net profit only coming in at 21.3% and 22.3% of our and consensus full year estimates, we expect subsequent quarters to be stronger. Both Group revenue and pre-sales in 1QFY24 are lifted by higher contribution from sale of nonstrategic plots of land. The Group chalked RM1.42bn pre-sales in the first quarter, which is on track to meet its FY24 sales target of RM4.4bn. Net gearing improved further to 0.45x, from 0.49x while unbilled sales stood at RM5.38bn as at endMarch 2024. All told, no change to our earnings estimates. With current sector valuations trading higher at ~0.65x book value, we adjust SP Setia’s TP from RM1.00 previously to RM1.30, pegged at ~50% discount to its book value (or about 14.6x of its FY25 EPS). Granted, the Group might see its earnings bumped higher if more land sales materialise. Until we see more traction in increased property sales coupled with margins recovery however, we would prefer to stay on the sidelines. Call on SP Setia is cut to Neutral.
Source: PublicInvest Research - 17 May 2024
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