SP Setia earnings forecasts cut after results miss expectations

KUALA LUMPUR: Research houses have cut their earnings forecasts for SP Setia Bhd after its third quarter (Q3) and nine-month results missed expectations.

Hong Leong Investment Bank Bhd (HLIB) dropped its earnings forecast for the property developer by 13.9 per cent, 11.6 per cent and 10.2 per cent for financial year 2026 (FY26), FY27 and FY28, respectively, to factor in lower sales assumptions.

The firm said SP Setia's core earnings for the cumulative nine-month period ended Sept 30, 2026, of RM75.9 million only accounted for 28.3 per cent of its full-year forecast and 21.7 per cent of consensus.

"The negative deviation in Q3 was due to lower-than-expected progress billings, mainly from its Setia Alaman project."

The company posted a core loss of RM2.2 million in the quarter under review.

"For Q4, earnings should benefit from the recognition of the land sale to another property developer and stronger billings from Setia Alaman's industrial plots."

The firm added SP Setia's historical average quarterly property sales run rate of above RM1 billion and gross profit margins rank among the strongest across peers.

However, high fixed costs, finance costs and its share of BPS losses constrain earnings conversion.

"This, in our view, sets a high sales hurdle for profitability and leaves earnings particularly vulnerable to any slowdown in sales."

HLIB kept its "Hold" call on the stock with a lower target price of 62 sen.

In a separate note, Public Investment Bank Bhd said SP Setia's results only met 39.4 per cent of its estimate and 40 per cent of the consensus.

"As such, we revised our FY26 and FY27 earnings forecast downwards by about 26 per cent to 38 per cent after adjusting our billings and margins assumptions," it said.

Separately, the firm said pre-sales remained resilient despite softer market demand, reaching RM2.34 billion for the nine-month period, supported by domestic developments of RM1.79 billion and international developments of RM431 million or about 51 per cent of its FY26 sales target of RM4.6 billion.

"We understand that it could seal two to three land sale deals to data centre players by the end of 2026 that could bump its pre-sales by year-end."

The firm kept its "Neutral" call in the stock with a lower target price of 70 sen.