· We maintain BUY on Sunway, with an unchanged fair value of RM3.74/share, based on a 20% discount to the SOP value of RM4.65/share.

· Its listed subsidiary Sunway Construction Group Bhd (SCG) posted a 2QFY15 core net profit of RM41.6mil (+21% QoQ), bringing the 1H15 core earnings to RM76mil – beating expectations.

· The 1H core net profit represents 65% and 58% of our and consensus estimates. The operating result was beyond expectations, with est. EBIT at 76% of our full-year forecast. No dividend was declared.

· As at 30 June, 2015, the outstanding order book amounted to RM2.69bil (vs. RM2.76bil as at end-March 2015).

· SCG has secured RM520mil worth of new jobs so far this year, vs. our assumption of RM1.8bil. SCG targets to achieve new orders totaling RM2bil annually.

· Backed by parent Sunway, SCG can count on RM500mil- RM800mil worth of jobs annually. · As at end-June 2015, SCG’s outstanding order book accounts for 1.4x FY14’s revenue of RM1.9bil. We project SCG’s FY15F-FY17F PAT at RM117-137mil.

· We maintain our numbers for now, pending Sunway’s result next week. SCG’s better-than-expected numbers would help mitigate any decline in property sales. Sunway is facing headwinds in its property development division. For 1HFY15, it registered RM500mil worth of property sales.

· Pursuant to the listing of SCG, Sunway is set to pay out 25sen-28sen/share in a special dividend, translating into a yield of 7%-8%, apart from an expected regular dividend of 10 sen/share.

· We expect Sunway to pay out the dividend by the end of next month.

· We believe Sunway’s long-term prospects are intact, notwithstanding the current blip in the property market, while its other divisions, including property investments, will cushion the impact of the soft property market.

· Apart from the anticipated special dividend payout, we maintain BUY, for continued exposure to the southern economic development corridor, specifically in Sunway Iskandar.

Source: AmeSecurities Research - 24 Aug 2015