- We upgrade Sunway to a BUY with an unchanged fair value of RM3.05/share, based on a 10% discount to an SOP value of RM3.38/share.

- The share price has fallen significantly, by 34%, since its peak of RM3.56/share on 31 May 2013. Sunway on Friday announced a 9MFY13 core net profit of RM325.4mil (37.6% YoY) – accounting for 80% and 82% of our and consensus forecasts, respectively.

- However, 9MFY13’s effective tax rate was at only 17% vis-à-vis our projected corporate rate of 25%. Hence, we deem the result to be within expectations.

- Apart from the earlier 5 sen/share dividend for 2QFY13, no additional amount was declared.

- Group EBIT margin fell marginally by 0.2ppt YoY to 9.9% but this has improved compared to 1HFY13’s 9.5% (vs. our assumption at 12%). The 3QFY13 EBIT continued to improve to 10.9% from the previous quarter’s 10.4%.

- For 9MFY13, property development contributed significantly to the earnings improvement, as the division’s revenue surged by 43%, while estimated EBIT rose by 33%, with high billings from developments in Sunway South Quay, Sunway Velocity and Sunway Nexis.

- YTD property sales reached RM1.1bil (effective: RM836mil), vs. 9MFY12’s RM1.22bil (effective: RM1.06bil). It achieved sales of RM1.8bil in 2012.

- As at 30 September 2013, unbilled sales stood at RM2.2bil (effective: RM1.8bil) vs. RM2.41bil (effective: RM2.06bil) a year earlier. Launches, as of November 2013, totalled RM1.7bil.

- Construction also boosted the group’s performance, as the division’s revenue and estimated EBIT rose by 29% and 35%, respectively, in view of progress billings from the MRT job, while the quarry operations’ margin surged by 6.3ppts.

- As of November 2013, construction order book replenishment totalled ~RM2bil, including internal works. External works secured so far, amounted to RM1.5bil – equal to our new order assumption for the year.

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

Source: AmeSecurities