Investment Highlights

• We upgrade Sunway to BUY from HOLD recommendation with a higher fair value of RM1.95 (from RM1.73) per share (Exhibit 4) using SOP valuations. We raised our FY19, FY20 and FY21 earnings by 3.8%, 4.3% and 4.5% respectively to reflect the timing of revenue recognitions of property development division given its strong take-up rates.

• During a recent meeting with the company, management updated us on its latest development. Sunway sees a bright spot in the healthcare industry with the increasing demand for healthcare services and a growing medical tourism industry. Sunway Medical is embarking on an extensive expansion plan 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 at the final phase of construction and is expected to be completed by 2H2019. Meanwhile, groundwork has begun in the Seberang Jaya, Penang hospital and the building is scheduled for completion in 2020.

• 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 has also lined up several launches in 2019 with a combined GDV of RM2.0bil.

• In the central region, Sunway Velocity TWO Phase 2 (highrise residential – GDV RM300mil) was launched in March and saw strong a take-up rate of 50% within 2 weeks. Other projects that are slated for launch in the central region this year are 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).

• The company launched several projects in 2018 with a combined GDV of RM2.07bil (Exhibit 3). These launches have been well received with average take-up rates and bookings of more than 80%.

• 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 RM6.0bil. Hence, we upgrade our call to BUY.

Source: AmInvest Research - 12 Apr 2019