Affin Hwang maintains Hold on SP Setia, reduces TP to RM2.30

KUALA LUMPUR: Affin Hwang Capital research maintained its hold call on SP Setia Bhd and reduced its target price to RM2.30 from RM2.72 previously following weaker-than-expected 1Q19 earnings that missed both its and consensus estimates.

SP Setia’s 1Q19 net profit of RM53mil came in at 17% and 12% of its and consensus full-year forecasts respectively due to a surprise forex loss.

“We were surprised by an unrealised forex loss of RM35m on foreign loans as the Ringgit had weakened, but core net profit of RM85m (+66% yoy) was within our expectation,” said Affin Hwang.

Revenue meanwhile grew 32% year-on-year to RM865mil in the quarter due to higher progress billings for its ongoing projects as well as strong property sales in 4Q18.

However, sales target for the quarter under review was 35% below the RM1.1bil achieved in the previous corresponding quarter.

The research house said buyers remained cautios due to weak market conditions while SP Setia launched new properties worth only RM339mil in 1Q19 despite plans to launch RM6.47bil worth of new properties in 2019.

“We expect sales to improve with promotions and stamp duty waivers under the Home Ownership Campaign in 1H19,” said Affin Hwang.

Source: TheStar