Investment Highlights

• We maintain our BUY call on Sunway Bhd (Sunway) with an unchanged FV of RM2.07 per share based on SOP valuations (Exhibit 2). We made no changes to our FY19– 21 net profit forecasts.

• During a recent engagement with the company, management updated us on its latest development. Sunway’s property division is targeting new sales of RM2.0bil in FY20, which is 54% higher than FY19’s target of RM1.3bil. The company also lined up several launches for 2020 with a combined GDV of RM3.5bil (FY19: RM2.0bil).

• In the central region, projects that are slated for launch this year are Sunway Velocity TWO, KL (Tower C) (serviced apartments – GDV RM300mil), Sunway Avila retail, KL (retail shops – GDV RM31mil) and Sunway Belfield, KL (serviced apartments – GDV RM360mil).

• Meanwhile in the southern region, Sunway will roll out Sunway Maple Residence, Iskandar (townhouses – GDV RM100mil). The company is also planning to launch Sunway Valley City in Paya Terubong, Penang (shops and offices – GDV RM250mil).

• For overseas projects, Sunway will be mainly focusing on Singapore with 3 projects, namely: (i) Parc Canberra, Canberra Link (executive condominiums – GDV RM560mil); (ii) Ki Residence, Clementi (private condominiums – GDV RM1.0bil); and (iii) Park Residence, Tampines (executive condominiums – GDV RM880mil).

• Sunway’s balance sheet remained healthy with a net gearing ratio of 32% as of 9MFY19. With the capex requirement for the expansion of its healthcare business and ongoing property development, we expect its net gearing to stay above 30% in the next 3 years.

• We are keeping our FY19–21 earnings forecasts. Our fair value is unchanged at RM2.07. 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 - 6 Jan 2020