In a note today, Maybank Investment Bank Bhd said property sales for the first three months of 2023 of RM1.03 billion were in line with estimates, accounting for 25% of its RM4.2 billion financial year 2023 (FY2023) sales goal (+2.2% year-on-year).
The bank upgraded SPSB to ‘buy’ for its “undemanding valuation” with an unchanged target price (TP) of 70 sen.
“SPSB now trades at an undemanding 0.18 times/0.12 times PBV/PRNAV (price-to-revalued net asset valuation),” it added.
RHB Investment Bank analyst Loong Kok Wen expects sales and construction work to pick up more materially in the second half of the year.
“In the pipeline, launches will mainly concentrate in the central region, including new phases in Setia Alam, Ecohill 1 & 2, Eco Templer, Bandar Kinrara, Setia Eco Park, Alamsari and Alam Impian.
“The management also indicated that there could be some potential land disposals in Q2 2023 that should help to pare down debt,” said Loong.
RHB maintained its ‘neutral’ call but with a TP of 60 sen, down from 64 sen previously.
High debt problem
Meanwhile, Kenanga Investment Bank Bhd analyst Lum Joe Shen was more sceptical, adding he remains concerned over SPSB’s high debt.
The group’s borrowings and debt securities totalled RM10.9 billion as of March 31, 2023. He noted that SPSB intends to bring its net gearing of 0.61x down further mainly through land sales.
He is also unconvinced about the group’s optimistic plan to launch almost RM5 billion worth of properties in 2023.
“We doubt whether the lofty aim is a realistic target amidst the challenging backdrop. Recall, in FY2022, the group planned to launch RM4 billion worth of properties but only managed to hit RM1.3 billion,” said Lum.
For FY2023, SPSB intends to launch RM4.9 billion worth of projects, with RM683 million already launched this quarter, to achieve its RM4.2b sales target.
Of these launches, 78% would be from the central region, 8% from Johor and the rest from Penang.
Kenanga maintained its ‘underperform’ call and TP of 38 sen, on an unchanged RNAV (revalued net asset value) discount of 90%, steeper than peers’ 60%-65% to reflect its elevated debt levels.
Thus, Lum remained cautious on SPSB due to its high debt-servicing obligations in the near-term, and risk of the property sector deteriorating further.
At the close, SPSB’s share price was up half-a-sen at 54 sen, giving it a market capitalisation of RM2.16 billion.