- We maintain HOLD on Sunway with an unchanged fair value of RM3.05/share, based on a 10% discount to a tweaked and higher SOP value of RM3.38/share (vs. RM3.21/share previously).

- Sunway yesterday announced a 1HFY13 core net profit of RM201mil (+51% YoY) – making up 50% of our forecast and 51% of consensus.

- Including an exceptional gain of RM60mil (share of fair value gain in SunREIT), its bottom line hit RM261mil (+19% YoY) on the back of an 18% rise in turnover to RM2.14bil – representing 54% of our projection.

- It declared a single-tier interim dividend of 5 sen/share (2% yield). We had expected a 1.5 sen/share interim dividend and 3 sen/share final dividend – for a payout ratio of ~20%.

- The 1HFY13 EBIT was below our forecast, but this continued to be largely mitigated by a lower effective tax rate at 17% vis-à-vis the corporate rate of 25%. Additionally, the interest charges represented only 34% of our projected full-year number.

- EBIT margin in 1HFY13 improved marginally by 0.4ppt YoY to 9.5% (our assumption at 12%), and for 2QFY13, it was up 2ppts QoQ to 10.4%. We maintain our operating margin assumptions for now.

- Property development and construction contributed more to earnings in 1HFY13 as operating margins improved by1.1ptps and 1.5ppts respectively, while the quarry operations’ margin had surged by 7.2ppts.

- For the first half, property sales came in at RM606mil (effective RM492mil; +27% YoY, -47% QoQ). YTD, property launches amounted to RM680mil. As at 30 June, 2013,unbilled sales amounted to RM2.2bil (effective RM1.8bil).

- Sunway says construction revenue and profit fell QoQ due to a slight delay in the LRT project arising from a stop work order imposed on all contractors as a result of accidents at the work site of other packages not undertaken by the group.

- The progress of the MRT project was also slightly delayed due to adverse weather conditions which resulted in slower progress billings.

- All in, we deem the results to be in-line with expectations. We maintain our numbers.

Source: AmeSecurities