Broker: Maybank Investment Bank Berhad
Date of Report: May 22, 2025

SP Setia Bhd: Stronger Earnings Forecast and Sales Acceleration Set to Boost Investor Confidence in 2025

Overview: Robust Growth Outlook for SP Setia Bhd

SP Setia Bhd (SPSB), a leading Malaysian real estate developer, is poised for a significant uplift in earnings and sales momentum in the coming quarters of 2025. The company’s diversified real estate portfolio, which includes landmark projects such as Setia Alam and Setia Eco Park, is demonstrating resilience and growth potential despite seasonal headwinds and external challenges. Maybank Investment Bank Berhad reiterates its BUY recommendation for SPSB, with a revised price target of MYR 1.46, reflecting a 23% upside from the current share price of MYR 1.19.

Q1 2025 Results: Earnings In Line, Seasonal Weakness Observed

SPSB reported a 1Q25 core net profit of MYR 66.3 million, down 9% year-on-year and 26% quarter-on-quarter. This performance was broadly in line with analyst expectations, representing 21% of Maybank’s and 16% of consensus full-year estimates. The quarter’s earnings were impacted by festive seasonality but are expected to rebound in the subsequent quarters.
1Q25 revenue: MYR 770.7 million (YoY: -48%, QoQ: -28%)
1Q25 EBIT: MYR 235.3 million (YoY: -16%, QoQ: -33%)
Core net profit: MYR 66.3 million
EBIT margin improved to 30.5% (up 11.6 percentage points YoY)
The company recorded a gain of MYR 108 million from a 6-acre land sale in Taman Pelangi, Johor, which is anticipated to lift future quarterly profits. Contributions from Setia Alaman Industrial Park (SAIP) are set to kick in during the second half of the year, providing an additional earnings boost.

Sales Performance: On Track for Ambitious Targets

SPSB’s 1Q25 property sales reached MYR 718 million, which is 15% of the full-year sales target of MYR 4.8 billion (including land sales). Notably, this figure includes a MYR 134 million land sale in the Klang Valley.
Key highlights:
FY25 sales target: MYR 4.8 billion (including land sales, -5% YoY)
Unbilled sales as of March 2025: MYR 3.8 billion (0.8x FY26E revenue)
New launches worth MYR 5 billion in GDV planned for coming quarters, including MYR 300 million in industrial properties
The company’s net gearing remained stable at 0.35x at the end of 1Q25.

Strategic Project Updates: Battersea and Industrial Parks

SP Setia’s 40%-owned Battersea Power Station (BPS) in the UK incurred a MYR 21-23 million loss in 1Q25, primarily due to interest costs. However, the outlook is improving, with ongoing negotiations with two potential tenants that could increase occupancy rates from 46% to over 70%.
The company is also aggressively pursuing industrial park developments. It is in talks with potential joint venture partners for the 307-acre Tanjung Kupang Industrial Park in Iskandar Malaysia, which has an estimated GDV of MYR 8 billion. Positive surprises could emerge from additional land sales in this region.

Financial Forecasts: Upward Revisions on Strong Margins and Land Sales

Maybank has raised its FY25-27 earnings forecasts for SPSB by 61%, 37%, and 14%, respectively. These upgrades are driven by: – Higher pretax margin for SAIP (40% vs previous 25%), reflecting better selling prices – Stronger billing assumptions for SAIP – Increased land sale assumption to MYR 307 million (up 96%)

Key Financial Projections (MYR million)

RNAV Analysis and Valuation

The revised target price of MYR 1.46 is based on 0.4x price to revised net asset value (P/RNAV). The RNAV estimate encompasses a wide range of ongoing and pipeline projects across Malaysia, Australia, the UK, Vietnam, and Japan.

RNAV Breakdown (Selected Projects)

• Setia Alam: 100% stake, NPV MYR 83.5m
• Setia City: 100% stake, NPV MYR 186.8m
• Setia Alaman: 100% stake, NPV MYR 321.6m
• Setia Eco Hill 2: 100% stake, NPV MYR 100.6m
• Setia Indah Johor: 100% stake, NPV MYR 22.2m
• Battersea Power Station (UK): 40% stake, NPV MYR 27.6m
• Atlas, Melbourne: 100% stake, NPV MYR 108.3m
• Unbilled sales: MYR 243.2m
• Grand total RNAV: MYR 18,157.1m

Per-share RNAV (fully diluted): MYR 3.65 Target price (0.4x P/RNAV): MYR 1.46

Risk Factors and Sensitivities

Investor attention is drawn to several risks that could impact earnings and valuation:

• Property sales performance — both positive and negative deviations
• Delays in project approvals
• Slower construction progress billings
• Rising raw material costs and labor shortages
• Potential increases in finance costs from higher interest rates
• Unexpected losses from the Battersea project

Share Price Performance and Market Statistics

SP Setia’s share price has fluctuated between MYR 1.03 and MYR 1.80 in the past 52 weeks. The company has a free float of 68.8%, with a market capitalization of MYR 6.0 billion (USD 1.4 billion) and 5,003 million issued shares.

Major Shareholders

• Permodalan Nasional Bhd: 28.5%
• Bumiputra Investment Foundation: 20.9%
• Employees Provident Fund: 9.3%

Financial Ratios and Key Metrics

• Core FD P/E (FY25E): 11.8x
• P/BV (FY25E): 0.4x
• Net dividend yield (FY25E): 1.8%
• EV/EBITDA (FY25E): 9.3x
• FCF yield (FY25E): 22.1%

Outlook: Strong Buy Recommendation Maintained

With significant new launches, robust unbilled sales, and the ramp-up of high-margin industrial projects, SP Setia is well-positioned for earnings growth in the medium term. The company’s strategic landbank and diversified project pipeline provide a buffer against sectoral volatility, while prudent financial management supports further upside potential.
Maybank Investment Bank Berhad maintains a BUY rating on SP Setia, highlighting its attractive valuation, strong sales recovery prospects, and improved earnings trajectory for 2025 and beyond.

Appendix: Definition of Ratings

• BUY: Expected return above 10% in the next 12 months (including dividends)
• HOLD: Expected return between 0%-10% in the next 12 months (including dividends)
• SELL: Expected return below 0% in the next 12 months (including dividends)