SPSETIA: Profits Fall Short of Expectations, Robust Pre-Sales Underpin Future Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Public Investment Bank reported that the developer registered a net profit of RM68.0 million in the third quarter of fiscal year 2025 (3QFY25), marking a 32.0% year-on-year and 31.8% quarter-on-quarter decline. This performance was described as “a tad below” both the investment bank’s and consensus expectations. For the nine-month period ending FY24 (9MFY24 YTD), the group’s net profit stood at RM234.9 million, a 50% year-on-year decrease, representing only 61% and 58% of the investment bank’s and consensus estimates, respectively.
Performance Review
The decline in the property development segment’s profits was primarily attributed to lower contributions from land sales, which amounted to RM407 million in 2QFY25. Additionally, reduced revenue from projects in Australia and Vietnam contributed to the dip, following substantial handovers of completed developments in the previous fiscal year. 9MFY24 revenue and pre-tax profit from the property development segment consequently fell by approximately 50% to RM2.42 billion and RM468 million, respectively, largely due to a nearly RM1 billion reduction in land sale transactions compared to the prior year.
Sales Momentum and Future Outlook
Despite the quarterly profit miss, the group demonstrated significant sales momentum in 3QFY25, with pre-sales surging by 78% year-on-year to RM1.59 billion. This was bolstered by new property launches throughout the year and strategic land transactions. Year-to-date, total pre-sales reached RM3.49 billion, representing about 73% of its FY25 sales target of RM4.8 billion. Domestic projects were the primary driver, contributing RM2.91 billion (approximately 83% of total sales), with notable contributions from the Southern and Central Regions. International projects added RM577 million to the total.
Looking ahead, the group’s unbilled sales increased to RM4.1 billion from RM3.9 billion in 2QFY25. This robust pipeline is supported by 42 ongoing projects, a substantial remaining land bank of 5,191 acres, and an effective remaining Gross Development Value (GDV) of RM90 billion. Public Investment Bank maintained its earnings forecasts, expressing confidence that the developer’s subsequent quarters are expected to improve. The investment bank has reiterated its “Neutral” call on the stock, with a target price of RM0.93, based on a 65% discount to its book value.
