Investment Highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with an unchanged fair value of RM1.73 per share based on SOP valuation (Exhibit 2). We made no changes to our FY19–20 numbers while introducing FY21 earnings forecast at RM648.2mil.

• Sunway reported its FY18 revenue and core PATMI of RM5,410.3mil (+3.3% YoY) and RM581.4mil (-1.0% YoY) respectively. Core PATMI of RM581.4mil is within our and consensus full-year estimates.

• The property development division reported an FY18 revenue of RM619.6mil (-31.8% YoY) and PBT of RM158.6mil (-32.6%) mainly due to the adoption of the the MFRS 15 whereby profits of property development projects in Singapore and China can only be recognised upon completion. Nonetheless, Sunway reported strong new sales of RM1.88bil (+50% YoY) while unbilled sales of RM2.1bil will provide good earnings visibility in short to mid-term.

• The property investment segment reported FY18 revenue of RM818.4mil (+3.9% YoY) and PBT of RM291.4mil (+14.1% YoY) mainly due to additional contribution from new properties such as Sunway Velocity Hotel and Sunway Geo in Sunway South Quay, as well as from the opening of additional room inventory at The Banjaran Hotsprings Retreat & Spa in Ipoh.

• The construction segment FY18 PBT grew 1.4% YoY to RM190.1mil driven by higher construction profits (arising from the Parcel F building job in Putrajaya, Package V201 of the MRT2 and International School of Kuala Lumpur building contract in Ampang), partially offset by lower precast profits (due to the completion of several projects coupled with higher rebar prices). YTD, Sunway Construction has secured new jobs worth a total of RM1.55bil while its outstanding construction order book stands at RM5.2bil.

• Management declared a second interim dividend of 2 sen per share, bringing the total dividend payout to 5.5 sen for FY18, representing a payout ratio of 50%.

• 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 outstanding order book of RM5.2bil. Maintain BUY.

Source: AmInvest Research - 1 Mar 2019