Investment Highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with a lower fair value of RM1.65 per share (from RM1.71), based on SOP valuation (Exhibit 4). We reduced our FY18 and FY19 earnings forecasts to RM576.2mil (-6.5%) and RM590.5mil (-11.2%) respectively; and introduced our FY20 earnings forecast at RM612.1mil.

• Sunway was reclassified from the Properties to the Trading/Services sector in Bursa Malaysia on 16 June 2017 to reflect its strategic ambition to grow into non-property related business. At present, Sunway’s businesses are diversified mainly into: i) integrated property (property development, property investment, hospitality & leisure); ii) construction; and iii) investment (trading & manufacturing, quarry & building materials, healthcare and others).

• Presently, the property development division has several ongoing projects with a remaining landbank of 3,308 acres bearing a total GDV of RM54.4bil, giving it long-term earnings visibility and will drive the company’s growth going forward. The unbilled sales of RM1.4bil together with a slew of new launches in FY18-FY19 will boost its revenue in the near term. Meanwhile the strong portfolio of investment properties in the retail, hospitality, healthcare, office and education sectors provides strong recurring cash flow to the group.

• Sunway Construction’s outstanding order book now stands at RM5.6bil, indicating stable income for the construction division over the next 1-2 years.

• The group is expanding its healthcare business with plans to build 4 more hospitals. The new hospitals will be within its integrated developments in Sunway Velocity, Seberang Jaya, Sunway Damansara and Sunway City Ipoh. The Sunway Velocity hospital is currently under construction and is expected to be completed by 1Q2019.

• The group’s trading and manufacturing business serves close to 13,000 active customers from a diverse range of industries. These include construction, marine, oil & gas, mining, agriculture, manufacturing, logging and quarrying through strategic and vast distribution points located throughout Asia, including more than 50 offices in China, Thailand, Indonesia, Singapore, Australia and Malaysia.

• We believe the outlook for Sunway shall remain stable premised on its strong unbilled sales of RM1.4bil, a robust outstanding order book of RM5.6bil, expansion in healthcare business, and stable income from property investments and other divisions.

Source: AmInvest Research - 15 Oct 2018