Land Sale Gains Buoy S P Setia, Offset By Losses From Battersea

KUALA LUMPUR, Aug 15 (Bernama) -- S P Setia Bhd is anticipated to continue recognising land sale gains, particularly from Setia City, Shah Alam and Taman Pelangi, Johor, in the second half of 2024 (2H 2024) offset by Battersea Power Station (BPS) losses. 

In a filing with Bursa Malaysia yesterday, S P Setia Bhd's net profit soared to RM295.03 million in the second quarter ended June 30, 2024 (2Q FY2024) from RM43.06 million in 2Q FY2023, boosted by land sales.

Revenue jumped to RM1.49 billion from RM942.71 million contributed mainly by its property development segment.

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In a note today, Hong Leong Investment Bank Bhd (HLIB) said despite the results coming in at 52.3 per cent of a full-year forecast, they were below expectation with its 1H 2024 boosted by substantial land sale gains of RM361 million.

“We anticipate lower land sale gain in 2H 2024. The negative deviation in our results was due to a wider-than-expected share of losses from BPS amounting to RM125 million in 1H 2024,” it said.

A BPS joint venture company sold an office block with a five-year rental guarantee provision based on a forecasted shortfall between the rental guarantee and the threshold net operating income. The office building was completed in April 2024. Losses could “persist” until the office market improves, HLIB said.

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The United Kingdom office market is “challenging” and HLIB expects the UK project to “take a longer time to secure tenants for its office towers,” resulting in continuing losses as a result of that rental income guarantee provision.

“Factoring this, we lower our FY 2024/2025 forecasts by -14 per cent/-8.1 per cent while leaving our FY 2026 forecast unchanged,” it added. 

However, HLIB remains confident that the group’s overall performance will be well-supported by the robust recovery in Malaysia’s property market.

“We maintain a buy call with a lower target price of RM1.80 per share,” it said. 

Meanwhile, Public Investment Bank Bhd said S P Setia’s net profit in 1H 2024 has surpassed consensus full-year estimates.

“We adjusted our FY 2024 upwards by 59 per cent to account for gains from the completed land sales and also two more pending completions in 2H FY2024 (with an estimated cumulative RM200 million gain) but mitigated by losses from BPS.

“We maintain a neutral call with target price unchanged at RM1.30,” it added. 

At 11.50 am, the counter was down 21 sen at RM1.31, with 73.15 million shares traded.

-- BERNAMA