- 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.

- Sunway posted a 2Q core net profit of RM137mil (+4.6% QoQ, +8.4% YoY), bringing the total for 1H to RM267mil (+13% YoY) – in line with expectations and accounting for 48% and 54% of our and consensus forecasts, respectively.

- It declared a 5 sen/share dividend for 1H15. Apart from the regular dividends, Sunway is expected to distribute 25 sen-28 sen/share in a special payout by the end of next month.

- The slowdown in the property development division was palpable, with revenue and operating profit accounting for only 39% and 23% of our forecasts, respectively amid a significant decline in margins.

- The trading and manufacturing division was also affected, with operating margin contracting by over 6% QoQ and YoY. Sunway said the division was affected by post GST slowdown and reduced demand overseas following a drop in oil and commodity prices.

- As expected, the absence of property launches in 1H15 was made up for by the construction and quarry divisions. Property sales in 1H15 totalled RM478mil (effective: RM353mil). Notably, unbilled sales amounted to RM2.3bil (effective: RM1.7bil) as at end-June 2015.

- The construction division was exceptionally strong, with its 1H15 EBIT already making up 98% of our full-year number. However, this was mainly due to a reversal of over-elimination of intra-group profit in previous quarters.

- As at end-June, the outstanding order book amounted to RM2.69bil (vs. RM2.76bil as at end-March 2015). We maintain our numbers and our forecasts, for now. Sunway is targeting to launch RM2.1bil worth of projects in 2H15.

- 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 - 28 Aug 2015