Investment Highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with a revised fair value of RM1.72 (from RM1.65) per share (Exhibit 1) using SOP valuations. We made no changes to our FY18 numbers while tweaking FY19 and FY20 earnings upwards by 0.6% and 2.3% to reflect the timing of revenue recognitions.

• During a recent engagement with the company, management updated us on its latest development. Sunway’s property division is targeting RM1.3bil new sales for FY19, which is 28% lower than FY18’s actual new sales of RM1.8bil. The company also lined up several launches in 2019 with a combined GDV of RM2.0bil.

• In the central region, projects that slated for launch this year are Sunway Velocity TWO Phase 2 (high-rise residential – GDV RM300mil), Sunway Avila (high-rise residential – GDV RM230mil) and Sunway GEOLake Residences (townhouses – GDV RM100mil). In Ipoh, there is Sunway Onsen Suites (high-rise residential – GDV RM120mil).

• In the southern region, Sunway will roll out Sunway Citrine Lakehomes Phase 3, Iskandar (townhouses – GDV RM100mil), Sunway Lenang Heights (landed residential – GDV RM150mil); and the Brookvale, Clementi in Singapore (high-rise residential – GDV RM1bil).

• Based on the latest update from the management, Sunway has chalked up new sales of RM1.8bil in 2018, exceeding its target of RM1.7bil. The company launched several projects in 2018 with a combined GDV of RM2.1bil; namely Rivercove Residences EC in Singapore (high-rise residential – GDV RM590mil), Sunway GEOLake (high-rise residential – GDV RM480mil), Sunway Citrine Lakehomes Phase 2, Sunway Iskandar (landed residential – GDV RM80mil) Sunway Gardens, Tianjin, China (high-rise residential – GDV RM600mil) and Sunway Velocity TWO Phase 1 (high-rise residential – GDV RM320mil). These launches have been well received with average take-up rates and bookings of more than 80%.

• Sunway’s balance sheet remained healthy with a net gearing ratio of 45% as of 9MFY18. With the capex requirement for the expansion of its healthcare business and ongoing property development, we expect net gearing to stay above 45% in the next 3 years.

• We believe the outlook for Sunway remains positive premised on its unbilled sales of RM2.1bil, strong income contribution from property investment and a robust construction outstanding order book of RM5.2bil. Maintain BUY.

Source: AmInvest Research - 14 Jan 2019