SP Setia earnings forecasts cut after results miss expectations

KUALA LUMPUR: Financial institutions have lowered their earnings predictions for SP Setia Bhd after its Q3 and nine-month results failed to meet forecasts. Hong Leong Investment Bank Bhd (HLIB) reduced its earnings forecast for SP Setia by 13.9 percent, 11.6 percent, and 10.2 percent for fiscal years 2026, 2027, and 2028, respectively, factoring in lower sales assumptions.

The firm reported that SP Setia's core earnings for the nine-month period ending September 30, 2026, accounted for only 28.3 percent of its annual forecast and 21.7 percent of the consensus. Lower-than-expected progress billings, mainly from the Setia Alaman project, contributed to the Q3 negative deviation. The company reported a Q3 core loss of RM2.2 million.

Earnings for Q4 are expected to improve from the recognition of a land sale and stronger billings from Setia Alaman's industrial plots. However, high fixed costs, finance costs, and the company's share of BPS losses constrain earnings conversion, creating a high sales hurdle for profitability and making earnings particularly sensitive to any sales slowdown.

HLIB maintained a Hold rating on the stock with a lower target price of 62 sen. Public Investment Bank Bhd also revised its FY26 and FY27 earnings forecast downwards by about 26 percent to 38 percent after adjusting its billings and margins assumptions. Despite softer market demand, pre-sales remained resilient, reaching RM2.34 billion for the nine-month period, supported by domestic developments of RM1.79 billion and international developments of RM431 million, representing about 51 percent of its FY26 sales target of RM4.6 billion.

The firm anticipates sealing two to three land sale deals with data center players by the end of 2026, potentially increasing pre-sales by year-end. The firm kept a Neutral rating on the stock with a lower target price of 70 sen.