Investment Highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with a higher fair value of RM2.00 per share (from RM1.95) based on SOP valuations (Exhibit 2) as we roll over our valuations to FY20. We are keeping our FY19–21 net profit forecasts.

• Sunway reported its 1HFY19 revenue and PATMI at RM2,200.8mil (-13.4% YoY) and RM382.9mil (+19.9% YoY) respectively. Stripping off the net gain from the disposal Sunway University assets (RM37.7mil) and revaluation of Sunway REIT properties (RM43.6mil), core PATMI of RM301.6mil (-5.6%) came in within expectations at 50% and 48% of ours and consensus full-year estimates.

• The property development division posted a 1HFY19 revenue of RM201.4mil (-8.8% YoY) while its PBT was RM70.1mil (- 9.6%). The lower revenue and PBT were mainly due to lower sales and progress billings from local development projects. Sunway reported new sales of RM735mil (-12.5% YoY) while unbilled sales were higher at RM2.7bil (YoY: RM1.5mil; QoQ: RM2.2bil) and these will provide good earnings visibility in short to mid-term.

• The property investment segment registered a 1HFY19 revenue of RM372.8mil (-2.6% YoY) and PBT of RM179.7mil (+11.1% YoY) mainly due to a higher contribution from Sunway Velocity Mall as well as improved contribution from the group’s theme parks.

• The healthcare segment chalked up a 1HFY19 revenue of RM267.6mil (+27.4% YoY) and PBT of RM34.7mil (+59.7% YoY), contributed by higher occupancy from increased number of new beds and higher outpatient treatments.

• The construction segment’s 1HFY19 revenue and PBT were of RM639.6mil (-28.4% YoY) and RM91.1mil (-1.3% YoY) respectively. The weaker revenue was mainly due to lower progress billings from local construction projects and higher intra-group eliminations. Meanwhile, the higher PBT was boosted by lower intra-group profit eliminations. YTD, Sunway Construction has secured new jobs worth a total of RM1.5bil while its outstanding construction order book stands at RM5.8bil.

• We are keeping our FY19–21 earnings forecasts. Our fair value is increased to RM2.00 from RM1.95 as we roll over our valuations to FY20. We believe the outlook for Sunway remains positive premised on its: (i) improving unbilled sales of RM2.7bil; (ii) stable income contribution from property investment; (iii) a robust outstanding order book of RM5.8bil; and (iv) strong growth potential in healthcare business. Maintain BUY.

Source: AmInvest Research - 28 Aug 2019