Investment Highlights

• We maintain BUY on Sunway with a higher fair value of RM2.27/share (vs. RM2.20/share previously) based on SOP valuations, which also reflect a 3% premium for our 4-star ESG rating (Exhibits 5 & 6). Our higher SOP stems from a revaluation of investment properties to market prices.

• Sunway’s FY21 core net profit of RM391mil came in within our expectation but 27% above consensus estimates. Thus, we make no changes to our forecasts.

• FY21 property development revenue rose 26% YoY to RM624mil, thanks to higher sales and progress billings from local projects as well as increased contribution from the completion and handover of 2 local development projects in the second half of the year.

• However, FY21 PBT fell 48% YoY to RM153mil as higher profit was recognised in FY20 from the RM183mil balance of the development earnings for its Singapore and China property development projects together with an RM8mil gain on a disposal of land in 4Q20.

• Sunway secured FY21 new sales of RM2.6bil (+96% YoY), which exceeded its own sales target of RM2.2bil by 19%. The strong sales were mainly boosted by projects in Singapore (55% of FY21 total group sales) while the remaining came from local (44%), particularly Sunway Belfield (which contributed 45% of local sales) and China (1%).

• Meanwhile, the group’s unbilled sales expanded 66% YoY to RM4bil as at 31 December 2021 (Exhibit 3). For FY22F, management is conservatively setting a lower sales target of RM2.2bil (-15% YoY vs actual FY21 sales).

• FY21 property investment revenue shrank 5% YoY to RM312mil due to movement control orders while its LBT of RM8mil narrowed from RM27mil in FY20 mainly due to the reopening of social and local tourism-related activities following the relaxation of movement restriction.

• Higher progress billings from local construction projects drove up FY21 construction revenue by 12% YoY to RM1bil and a pretax profit by 42% YoY to RM149mil.

• Following the partial divestment of its healthcare arm, Sunway Healthcare Group (SHG), SHG is now reclassified as a joint venture (from a subsidiary previously). With effect from 1 January 2022, the share of the profit or loss in SHG will be recognised under the equity method of accounting.

Investment Highlights

• We maintain BUY on Sunway with a higher fair value of RM2.27/share (vs. RM2.20/share previously) based on SOP valuations, which also reflect a 3% premium for our 4-star ESG rating (Exhibits 5 & 6). Our higher SOP stems from a revaluation of investment properties to market prices.

• Sunway’s FY21 core net profit of RM391mil came in within our expectation but 27% above consensus estimates. Thus, we make no changes to our forecasts.

• FY21 property development revenue rose 26% YoY to RM624mil, thanks to higher sales and progress billings from local projects as well as increased contribution from the completion and handover of 2 local development projects in the second half of the year.

• However, FY21 PBT fell 48% YoY to RM153mil as higher profit was recognised in FY20 from the RM183mil balance of the development earnings for its Singapore and China property development projects together with an RM8mil gain on a disposal of land in 4Q20.

• Sunway secured FY21 new sales of RM2.6bil (+96% YoY), which exceeded its own sales target of RM2.2bil by 19%. The strong sales were mainly boosted by projects in Singapore (55% of FY21 total group sales) while the remaining came from local (44%), particularly Sunway Belfield (which contributed 45% of local sales) and China (1%).

• Meanwhile, the group’s unbilled sales expanded 66% YoY to RM4bil as at 31 December 2021 (Exhibit 3). For FY22F, management is conservatively setting a lower sales target of RM2.2bil (-15% YoY vs actual FY21 sales).

• FY21 property investment revenue shrank 5% YoY to RM312mil due to movement control orders while its LBT of RM8mil narrowed from RM27mil in FY20 mainly due to the reopening of social and local tourism-related activities following the relaxation of movement restriction.

• Higher progress billings from local construction projects drove up FY21 construction revenue by 12% YoY to RM1bil and a pretax profit by 42% YoY to RM149mil.

• Following the partial divestment of its healthcare arm, Sunway Healthcare Group (SHG), SHG is now reclassified as a joint venture (from a subsidiary previously). With effect from 1 January 2022, the share of the profit or loss in SHG will be recognised under the equity method of accounting.

Source: AmInvest Research - 28 Feb 2022