Shares of SP Setia, the Malaysian property developer, saw a significant jump early Thursday following raised target prices by analysts. Despite reporting a decline in second-quarter net profit and a fall in revenue, analysts remain optimistic about the company’s outlook.
Strong Performance in the Stock Market
The shares of SP Setia rose as much as 13% and were recently 9.5% higher at 0.87 ringgit, resulting in year-to-date gains of 44%. This surge indicates that investors maintain confidence in the company’s long-term prospects.
Q2 Earnings Performance
SP Setia reported a net profit of MYR43.1 million in the second quarter, down from MYR80.1 million in the same period last year. The decline can be attributed to higher finance costs and foreign-exchange losses. Additionally, the company’s revenue fell 7.4% to MYR942.7 million.
Analysts’ Optimism and Revised Target Prices
Maybank Investment Bank has raised SP Setia’s target price to MYR1.20 from MYR0.73, maintaining a buy rating. They believe that the company is on track to achieve its MYR4.2 billion sales target for this year. Furthermore, SP Setia has already reached 61% of its 2023 sales goal in June, and Maybank analyst Wong Wei Sum expects a strong rebound in earnings during the fourth quarter with the completion of its Melbourne projects.
RHB Investment Bank has also increased SP Setia’s target price to MYR0.93 from MYR0.75, while maintaining a buy rating. They cite easing political risks after Malaysia’s state elections and the expectation of improved market sentiment as factors contributing to their optimism about the company’s future performance. RHB analyst Loong Kok Wen believes that SP Setia is already working on a debt-reduction plan and the recent substantial land disposals will help in reducing its gearing.
TA Securities has raised SP Setia’s target price to MYR1.05 from MYR0.75 with an unchanged buy rating. Analyst Thiam Chiann Wen believes that the positive sentiment surrounding Malaysia’s property sector, along with a better outlook, will lead to further increases in real-estate stocks.
Overall, despite the weaker quarterly earnings, analysts believe that SP Setia has the potential for future growth and recommend investing in the company.
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